This is an appeal [doc. # 1] from a decision of the United States Bankruptcy-Court, District of Connecticut (Krechevsky, B.J.) discharging the student loans of Debtor Claudia Curiston pursuant to a reopened Chapter 7 bankruptcy case.
1
See Curiston v. Conn. Student Loan Found. (In re Curiston),
No. 03-2097, 2004 Bankr.LEXIS 2322 (Bankr.D.Conn. Dec. 22, 2004). The Bankruptcy Court discharged her student debt because the court concluded that requiring Ms. Curi-ston to repay her student loans would impose an “undue hardship” on her within the meaning of 11 U.S.C. § 523(a)(8) and the Second Circuit’s controlling decision in
Brunner v. New York State Higher Education Services Corp.,
I.
The facts are set forth in greater detail in the Bankruptcy Court’s opinion, familiarity with which is assumed. ECMC does not contest the Bankruptcy Court’s findings of fact, 2 and this Court therefore adopts the Bankruptcy Court’s factual determinations as its own. Only those background facts that are especially salient are recounted here.
In 2004, Ms. Curiston was a 58 year-old widow, who had been diagnosed with and long suffered from Post-Traumatic Stress Disorder. Since 1989, Ms. Curiston had “suffered from physical symptoms of unknown etiology which impair her ability to walk and her balance.”
Curiston,
2004 Bankr.LEXIS 2322, at *4. The Bankruptcy Court found that Ms. Curiston “exhibits symptoms of severe anxiety exacerbated by stress,”
id.
at *4, is easily fatigued, is
Despite her disability and with substantial physical assistance from her late husband, Ms. Curiston gained a Bachelors Degree and in 1999 a Masters Degree in Social Work. This appeal focuses on the student loans she acquired in obtaining those degrees. After she obtained her degrees and graduated in 1999, Ms. Curi-ston actively sought employment as a part-time social worker, but without success. In 2002, after many unsuccessful interviews, Ms. Curiston accepted a part-time position with Asian Family Services (“AFS”). Due to budget cuts, Ms. Curi-ston was laid off by AFS in October 2003. However, at the time of her reopened bankruptcy case, Ms. Curiston was working three days a week as an independent contractor for AFS, where she earned $19 per client hour, or about an average of $1,000 per month in gross pay. See id. at *7. Ms. Curiston had applied in the past for a higher-paying job with the Connecticut Department of Children and Families (“DCF”), but had been told that her physical disability may inhibit her ability to do the work. And Ms. Curiston’s psychiatrist expressed misgivings about Ms. Curiston’s ability to handle the trauma she would encounter daily if she worked at DCF. See id. at *10-11.
The Bankruptcy Court found that Ms. Curiston’s health had improved somewhat, leaving her able to do part-time work, rather than rely solely on social security benefits. Id. at *12. Nevertheless, the court found that even if AFS should regain funding and be able to re-employ Ms. Cu-riston in a part-time position, her earnings would not likely provide for more than her basic needs in “a best case scenario.” Id. Thus, the Bankruptcy Court found as a fact that Ms. Curiston’s monthly expenses exceeded her income by over $2,000 per month, with no provision for contingencies or retirement 3 Id. at *8. Moreover, as a result of her inability to work a full-time job, her age, and her lack of retirement savings, the court also found that Ms. Cu-riston’s income would likely decrease in the future. Indeed, the court found that even if Ms. Curiston made all the budget adjustments ECMC recommended, she would still experience a monthly shortfall between income and expenses of over $900. See id. at *10.
II.
Whether a debtor can discharge her student loans in connection with a Chapter 7 petition is governed by 11 U.S.C. § 523(a)(8). That section provides, in relevant part, as follows:
(a) A discharge under section 727 ... does not discharge an individual debtor from any debt—
(8) for an educational benefit overpayment or loan made, insured or guaranteed by a government unit, ... unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor....
11 U.S.C. § 523(a)(8). In deciding whether a debtor meets the statutory standard of “undue hardship,” the Court must follow the Second Circuit’s decision in Brunner, in which the Second Circuit declared that a debtor may show that “undue hardship” would result from a court’s decision not to except student loans from discharge if the debtor can prove by a preponderance of the evidence the following three requirements:
(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debt- or has made good faith efforts to repay the loans.
Brunner,
ECMC does not contest the Bankruptcy Court’s factual findings or that Ms. Curiston has met the first prong of the
Brunner
test. Therefore, the question presented by this appeal is whether the facts as found by the Bankruptcy Court satisfy the second and third prongs of the
Brunner
standard.
See Grogan v. Garner,
A.
ECMC argues that in applying the second prong of the Brunner test, the Bankruptcy Court should not have considered Ms. Curiston’s documented Post-Traumatic Stress Disorder (“PTSD”) condition. According to ECMC, because Ms. Curiston suffered from PTSD before she bound herself to the student loan agreement, as a matter of law, she cannot now argue that her physical and mental health condition is an “additional circumstance” that has prevented her and will continue to prevent her from maintaining a minimal standard of living for a substantial portion of the repayment period, as required by Brun-ner.
1. Before reaching the merits of that question, the Court must address the threshold issue of whether ECMC may assert this argument on appeal. For
The Second Circuit has held that an appellate court may hear an argument not raised before the trial court in order “to avoid a manifest injustice
or where the argument presents a question of law and there is no need for additional fact-finding.” Sniado v. Bank Austria AG,
Therefore, the fact that the Bankruptcy Court does not discuss this issue is not that court’s fault; rather, it is ECMC’s. However, ECMC’s argument on appeal— that a bankruptcy court cannot as a matter of law consider a preexisting condition in its additional circumstances analysis— “presents a question of law and there is no need for additional fact-finding.” Id. Accordingly, the Court will exercise its discretion to address ECMC’s preexisting condition argument even though it was not raised in the Bankruptcy Court.
2. The Second Circuit has not yet had occasion to consider whether a court can as a matter of law consider a preexisting condition in assessing the second prong of its Brunner test. However, this Court sees no reason in Brunner, the statute, or logic to categorically prevent a court from considering a preexisting condition when assessing the additional circumstances prong.
As articulated in
Brunner,
the second element of its test requires the debtor to establish that “additional circumstances exist indicating that this state of affairs
Furthermore, it is difficult to see how a court could properly determine a debtor’s ability to pay off her loans if the court was required to ignore the debtor’s health and mental condition. Of course, the fact that a health condition may have existed in the past and even at the time a loan was incurred may well inform the court’s analysis, but the mere fact that the condition was preexisting should not bar the court from considering it. Perhaps when the debtor incurred the loans, she was overly (or even unrealistically) optimistic about her chances to repay them and also maintain a minimal standard of living. If such an individual proves on the basis of all of the facts that she is now unable and will continue to be unable to maintain a minimal standard of living for herself if required to repay her student loans, there is nothing in Brunner or the statute itself to prevent a finding of “undue hardship” merely because the debtor suffers from a physical or mental condition that existed at the time she incurred the loans. 4
To be sure, the additional circumstances element sets a high standard of proof. The district court in
Brunner
stated that “dischargeability of student loans should be based upon the certainty of hopelessness, not simply a present inability to fulfill financial commitment.... In addition ... this test has been formulated as the necessity of showing of unique or exceptional circumstances.”
Case law does not suggest the contrary. Indeed, in rejecting a claim similar to ECMC’s, the United States Bankruptcy Appellate Panel for the Ninth Circuit recently reviewed a number of circuit court decisions and concluded that “no circuit court has held that a ... condition in existence at the time the debtor obtained the educational loan in question must be excluded from consideration in the persistence analysis, or that the debtor must show a worsening or exacerbation to carry his burden on the second
Brunner
prong.”
Mason,
The cases ECMC cites in support of its argument are distinguishable from the case at bar, because the debtors in those cases failed to prove that their preexisting conditions impaired their ability to work or to pay off their student loans. For example, the debtor in
Goulet
failed to prove how his preexisting alcoholism and felony conviction prevented him from attaining full-time work.
See Goulet,
ECMC’s reliance on
Thoms,
Accordingly, the Bankruptcy Court properly considered the totality of circumstances — including, among many other factors, Ms. Curiston’s age and her mental and physical conditions — in assessing Brunner’s additional circumstances requirement. The following factors appear most relevant in considering that requirement: (1) Ms. Curiston’s age and the limited number of working years remaining in which to repay her loans, see Curiston, 2004 Bankr.LEXIS 2322, at * 12; (2) her lack of more lucrative job skills than those she is using, see id. at *11; (3) her psychological and physical disabilities, which prevent full-time employment, see id. at * 13; and (4) the likelihood that her expense-to-income ratio will continue to increase, see id. at *7, *10, *12 (noting that Ms. Curiston has made no provision for retirement, that the $450 her mother contributes monthly will cease when her mother moves to a nursing home, that the debtor will need to repair and eventually replace her car, and that her income is likely to decrease). All of those factors support the Bankruptcy Court’s conclusion that Ms. Curiston satisfied the second element of the Brunner standard. 7
Finally, ECMC argues that Ms. Curi-ston should supplement her earnings using her secretarial skills. That argument is also unconvincing. Ms Curiston’s secretarial training did not bring her much success in the past. The Bankruptcy Comb found that between 1978 and 1992, Ms. Curiston had held and was fired from several secretarial positions, none of which lasted longer than thirteen months.
Curiston,
2004 Bankr.LEXIS 2322, at *5. The Bankruptcy Court also
found'
— and
ECMC does not contest such finding
— that Ms. Curiston’s income is likely to decrease in the future. While ECMC in its brief individually attacks the sufficiency of Ms. Cu-riston’s age, disability, and job skills and history,
see
Appellate Brief of ECMC [doc. # 7] at 21-27, it is the unique combination of these factors that drove the Bankruptcy Court’s ultimate decision regarding the “additional factors” analysis. These findings, which ECMC has not contested on appeal, are “strongly suggestive of continuing inability to repay over an extended period of time.”
Brunner,
B.
ECMC also argues that in the Bankruptcy Court’s analysis of the third
Brunner
factor — good faith — the court gave insufficient weight to Ms. Curiston’s failure to apply for the William D. Ford Foundation’s Income Contingent Repayment Program (“ICRP”). The ICRP is administered by the U.S. Department of Education to assist low-income debtors who are saddled with large student loan debt. The Bankruptcy Court found that participation in the ICRP would stretch out Ms. Curiston’s payment commitment for twenty-five years and would require a payment of at least $175 per month (based on her then-current income),
8
in
To the extent that ECMC argues that Ms. Curiston’s failure to apply for the ICRP precludes a finding of good faith, such a
per se
argument has already been rebuffed several times by different courts.
See, e.g., Rutherford v. William D. Ford Direct Loan Program (In re Rutherford),
Here, the Bankruptcy Court found that Ms. Curiston did not apply to the ICRP program because she cannot afford the minimum payment under that program. See id. at *14-15. In the words of the Bankruptcy Court, Ms. Curiston’s participation in the ICRP “would appear futile in light of the debtor’s particular circumstances.” Id. at *14. Furthermore, Ms. Curiston may also be facing a large, non-dischargeable tax liability at the end of the payment period, see id. at *15, at a time when her annual earnings are likely to have decreased even further. Finally, the Bankruptcy Court found that Ms. Curiston had sought less drastic means of managing her debts held by ECMC in the past. The Bankruptcy Court specifically found that she had requested and received several deferments of the loans currently held by ECMC. See id. at *14.
Other facts also support the Bankruptcy Court’s finding of good faith. Good faith is “measured by [a debtor’s] efforts to obtain employment, maximize income and minimize expenses, and to undertake all other reasonable efforts to insure repayment.”
Elmore v. Mass. Higher Educ. Assistance Corp.,
Finally, the evidence showed that Ms. Curiston has scaled back her monthly expenses, expenses that the Bankruptcy Court found were reasonable. See id. at *8-9. ECMC has not contested that finding of fact on appeal. For all these reasons, the Court concludes that Ms. Curi-ston has carried her burden of proving good faith under the third Brunner prong.
III.
Accordingly, the judgment of the Bankruptcy Court is hereby AFFIRMED. The Clerk is directed to close this case.
IT IS SO ORDERED.
Notes
. Ms. Curiston filed a Chapter 7 bankruptcy petition with her now-deceased husband on January 1, 2001, but did not seek to discharge the loans at issue here in that original proceeding. Her husband died in April 2001. In 2004, Ms. Curiston petitioned to reopen her bankruptcy case in order to seek a discharge from her student loan indebtedness.
. ECMC devoted a substantial portion of its Appellate Brief [doc. # 7] to a factual recitation that appears to challenge the Bankruptcy Court’s factual determinations, see id. at 5-13, passim. One such example is ECMC's contention that ”[t]he record indicates that the physical or medical conditions alleged by Cu-riston have never been diagnosed, and are, at best, highly speculative.” See id. at 14. The Bankruptcy Court, however, specifically found that "[t]he debtor has provided ample evidence that she suffers from both psychological and physiological conditions that prevent her from working full-time.” Curiston, 2004 Bankr.Lexis 2322, at *13 (emphasis added). ECMC represented both in its Appellate Brief [doc. #7] at 3, and in its Reply Brief that it "has not challenged the Bankruptcy Court’s findings of fact....” Appellant’s Reply Brief [doc. # 14] at 1. In view of ECMC's representations, which were repeated at oral argument, the Court ignores the portion of any argument by ECMC that contests the Bankruptcy Court’s factual findings or is based upon any other, contrary factual finding.
. At the time of the Bankruptcy Court's decision, Ms. Curiston lived with her elderly mother in a rental apartment. Her mother contributed $450 to their monthly expenses. However, Ms. Curiston's mother was awaiting placement at a nursing home and her contributions to Ms. Curiston’s monthly expenses would end once that placement occurred. See Curiston, 2004 Bankr.LEXIS 2322, at *7.
. In fact, the Bankruptcy Code elsewhere protects debtors from some of the ramifications of optimistic pre-petition decisions they make. See, e.g., 11 U.S.C. § 541 (making unlawful and unenforceable so-called "ipso facto” or bankruptcy clauses).
. The Ninth Circuit Bankruptcy Appellate Panel appears to have softened
Brunner’s
additional circumstances requirement somewhat by stating that "[s]uch circumstances need not be 'exceptional,' except in the sense that they are tenacious and demonstrate insurmountable barriers to the debtor’s financial recovery and ability to pay for a significant portion of the repayment period."
Nys,
. ECMC's argument that
"Thoms ...
reflects the legal standard in the Second Circuit, a jurisdiction that historically relies upon its own judicial precedent” is similarly unpersuasive.
See
Suppl. Br. [doc. # 19] at 3. In
Porrazzo,
for example, the Bankruptcy Court for the District of Connecticut specifically rejected ECMC’s reliance on
Thoms
in a case that also dealt with a debtor whose preexisting medical condition prevented him from obtaining more lucrative employment.
See Porrazzo,
. Unlike the debtor in
Thoms,
Ms. Curiston has not "improved her financial picture with each new employment opportunity and ... acknowledged the likelihood that even if she remains in her current position, there is potential for financial advancement.”
Thoms,
. The Bankruptcy Court based this factual finding on ECMC's representations.
See Curi-ston,
at *3-4. Because ECMC has represented to this Court that it does not challenge the Bankruptcy Court's findings of fact, this Court adopts the Bankruptcy Court’s factual