ORDER
Plаintiff/Debtor William E. Fulbright (“Fulbright”) commenced this adversary proceeding on February 20, 2004, seeking a determination that excepting student loan debt owing to the Defendant United States Department of Education (“DOE”) from his discharge will impose an undue hardship on the Debtor and his dependents under 11 U.S.C. § 523(a)(8). DOE filed an answer admitting the Debtor is indebted to DOE for $88,651.94 in student loans, but denying that Fulbright’s student loan debts are dischargeable on grounds of undue hardship, and denying that Fulbright has met the “good faith” test because he failed to utilize various income-sensitive repayment options available based on Debtor’s ability to repay. After due notice, trial of this cause was held at Missоula on November 4, 2004. Fulbright, who is an attorney admitted to practice in the State of Montana, appeared in propria persona and testified. DOE was represented by assistant United States Attorney George F. Darragh, Jr. (“Darragh”). Plaintiffs Exhibits (“Ex.”) 1, 2, 3, 4, and 5, and DOE’s Ex. A, B, and C, all were admitted into evidence. In addition, by Stipulation of the parties a “Declaration of Lynda D. Faatalale” (“Faatalale’s Deck”), who is a loan analyst for the DOE, was admitted into evidence. At the conclusion of the parties’ eases-in-chief the Court closed the record and granted the parties ten (10) days to file simultaneous briefs, after which this matter would be taken under advisement. The pаrties’ briefs have been filed and reviewed by the Court, together with the record and applicable law governing undue hardship under § 523(a)(8). This matter is ready for decision.
This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding to determine to determine discharge-ability of particular debts under 28 U.S.C. § 157(b)(2)(I). This Order contains the Court’s findings of fact and conclusions of law pursuant to F.R.B.P. 7052. At issue is whether excepting Fulbright’s student loan debt from his discharge will impose an undue hardship on the Debtor or his dependents under § 523(a)(8), when Debtors tithe $430 per month from their income in charitable contributions to their church, which contributions are encouraged but voluntary, and not a requirement for membership in the church. For the reasons set forth below, Judgment will be entered for DOE dismissing Fulbright’s complaint.
FACTS
Fulbright is 42 years old and lives with his spouse and co-Debtor April D. Ful
Debtors live in a house at 259 Higgins Lane in Stevensville which they purchased by contract for deed on September 14, 1999. Ex. B, pp. 122-125. Fulbright testified that the contract for deed has been paid off using loans from the Debtors’ parents to pay off the amount due the sellers, the Sinclairs. He testified that Debtors continue to pay their parents the sum of approximately $1,158 per month, depending on the interest the parents have to pay on money they borrowed to pay off Debtors’ contract for deed. Debtors have no written agreement with their parents, only a “gentlemen’s agreement”. Fulbright testified that Debtors intend to pay off their parents when they qualify for a mortgage loan. An Internal Revenue Service (“IRS”) lien against the house was recorded in the yeаr 2000, for taxes assessed in the total amount of $25,915.43. Ex. 5.
Fulbright’s average monthly expenses total $3,714 2 , including his $1,158 mortgage payment, and a $430 monthly tithe to his church. Fulbright testified that tithing is voluntary but encouraged as a “step of faith”, and is an integral part of his religious beliefs. Fulbright testified that his expenses have increased since July of 2004. Fulbright’s gross pay as of July 2004 is $3,810.02, and net pay after taxes, retirement and insurance is $2,947.90 3 .
The parties agree that Fulbright is indebted to the DOE for consolidated guaranteed student loans, but dispute the amount of the DOE debt due and owing. Fulbright testified that the balance due claimed by DOE is $89,566.38, as on Ex. A. Ex. 2 and 3 show different amounts due 4 . Fulbright testified that he disputes the manner in which the student loan debt grew from $35,000 to the total shown on Ex. A of $89,557.49, which included capitalization of interest.
Fulbright testified that he made payments on his student loans and utilized available deferments for the first 4 years he was out of law school. Then in October 1988, he consolidated his 3 student loans. Faatalale’s Declaration describes the consolidation promissory note on the fourth page and attachment A in the amount of $35,155.02 in 1989. Fulbright testified he received a coupon book calling for payments of $297 per month, some of which he made, alternating payments with deferments. The loan was guaranteed by United Student Aid Funds and reimbursed by DOE. Faatalale’s Deck, 4th page 5 , ¶ 11.
Faatalale’s Declaration at pp. 3-5 explains the system in which a student loan lender which is unable to collect student loans from a borrower may request payment on the loan from the guaranty agency, which in turn if unable to collect may assign the loan to the DOE. Fulbright’s lender requested payment from the guaranty agency on his defaulted loans in the amount of $78,775.65, which included $46,942.86 or principal and $31,832.79 in accrued interest, and the guaranty agency capitalized the interest. Faatalale’s Deck, pp. 4-5, ¶ 11.
The guaranty agency received and credited Fulbright’s account with payments totaling $2,267.00 prior to assigning the debt to DOE. Faatalale’s Deck, 5th page, ¶ 12. Fulbright did not make any further payments after DOE took assignment of his loan, but DOE received $1,672.47 from the Chapter 13 6 Trustee. Faatalale’s Deck, p. 5, ¶ 13. Interest accrues on a daily rate of $11.61. Faatalale’s Deck, p. 5, ¶ 16. ' Faa-talale’s Deck, pp. 4-5, ¶ 11.
Fulbright testified that the last collection agency which contacted him offered him participation in the William D. Ford Federal Direct Loan Program (“William D. Ford Program”), but only if he would accept DOE’s claimed amount of debt, including the accrued interest. Fulbright refused because DOE and the collection agencies refused to address his issue regarding capitalization of interest, and he continued for 8 years to dispute DOE’s authority to capitalize the interest. Fulbright testified that he does not dispute the math on Ex. A adding the principal and interest for a total of $89,557.49, only the interest component. Fulbright testified that payment of his student loan debt over 10 years and 120 payments would require a monthly payment of $950.44, which he cannot pay. He further testified that DOE wants him to make payments for 25 years, at which point he will be 68 years old. The William D. Ford Program and remains available to Fulbright, providing him with 4 possible income contingent reрayment plans. Faatalale’s Deck, 8th page, ¶ 21 and Attachment I.
The Debtors filed a voluntary Chapter 7 petition on July 28, 2003, and filed their Schedules and Statement of Affairs on August 12, 2003. Schedule A lists Debtors’ real property at a value of $200,000
7
. Debtors listed $474,370 in unsecured nonp-riority claims on Schedule F, including stu
Fulbright filed his complaint to determine dischargeability of debt on February 20, 2004. The Trustee filed a Final Report, and a Final Decree was entered closing Debtors’ Chapter 7 case on November 12, 2004.
DISCUSSION
The discharge of student loan obligations is governed by 11 U.S.C. § 523(a)(8), which provides in relevant part:
(a) A discharge under section 727, 1141, 1228(a) 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(8) for an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship, or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents^]
The Bankruptcy Code does not define “undue hardship.” Courts have held, however, that Congress intended the term to be interpreted strictly, and on a case-by-case basis.
Albert v. Ohio Student Loan Comm’n (In re Albert),
It seems universally accepted, however, that “undue hardship” contemplates unique and extraordinary circumstances. Mere financial adversity is insufficient, for that is the basis of all petitions in bankruptcy.
Brown,
In addition:
[A] loan ... that enables a person to earn substantially greater income over his working life should not as a matter of policy be dischargeable before he has demonstrated that for any reason he is unable to maintain himself and his dependents and to repay the educational debt.
Report of the Commission of the Bankruptcy Laws of the United States,
House Doc. No. 93-137, Part I, 93rd Cong., 1st Sess. (1973) at 140, n. 14 and 15, reprinted in CollieR on Bankruptcy, Appendix 2 at Pl-i. In this casе the record includes evidence showing that Fulbright’s student loans enabled him to earn substantially greater income over his working life, both in private practice and as public defender and as deputy county attorney for Ravalli County where he is presently employed. Fulbright’s pretrial memorandum states he has been employed as a lawyer as a result of his law degree for 10 years, and that he “has no other job skills that are
In a complaint to determine the dischargeability of student loan debt, a debtor has the burden of proof to show evidence of undue hardship sufficient to discharge the debt.
In re Rifino,
Courts have identified several factors and tests to consider when determining whether “undue hardship” exists in a particular case.
See Long v. Educational Credit Management Corp. (In re Long),
(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.
Id.
The Ninth Circuit Court of Appeals adopted the
Brunner
test as the appropriate test for determining what constitutes undue hardship under 11 U.S.C. § 523(a)(8)(B).
United Student Aid Funds v. Pena (In re Pena),
First, the debtor must establish “that she cannot maintain, based on current income and expenses, a ‘minimal’ stаndard of living for herself and her dependents if forced to repay the loans.” Brunner,831 F.2d at 396 . The court noted that this portion of the test “comports with common sense” and had already “been applied frequently as the minimum necessary to establish ‘undue hardship.’ ” Id. (citing In re Bryant,72 B.R. 913 , 915 (Bankr.E.D.Pa.1987)).
Second, the debtor must show “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.” Brunner,831 F.2d at 396 . This second prong is intended to effect “the clear congressional intent exhibited in section 523(a)(8) to make the discharge of student loans more difficult than that of other nonexceptеd debt.” Id.
The third prong requires “that the debt- or has made good faith efforts to repay the loans....” Brunner,831 F.2d at 396 . The “good-faith” requirement fulfills the purpose behind the adoption of section 523(a)(8). Brunner,46 B.R. at 754-55 . Section 523(a)(8) was a response to “a ‘rising incidence of consumer bankruptcies of former students motivated primarily to avoid payment of education loan debts.’ ” Id., (quoting the Report of the Commission on the Bankruptcy Laws of the United States, House Doc. No. 93-137, Pt. I, 93d Cong., 1st Sess. (1973) at 140 n. 14). This section was intended to “forestall students ... from abusing the bankruptcy system.” Id.
Pena
at 1111;
Rifino,
This Court, in
House v. Montana Deferred Student Loan Corp. (In re House),
17 Mont. B.R. 321 (Bankr.D.Mont.1999), followed the directive of the
Pena
Court by utilizing the three-prong
Brun-ner
test, which test is also applicable in the instant case.
See also Gettle v. Sallie Mae Servicing Corp. (In re Gеttle),
19 Mont. B.R. 59,
I. First Prong.
As set forth above, the
Brunner
test starts with an examination of whether the debtor can maintain a minimal standard of living and still repay his student loan obligations.
Rifino,
The Court concludes, based upon the following reasoning, that Fulbright has not satisfied the first Brunner prong. Fulbright demonstrated that his expenses consume a large part of his income. However, the evidence does not show that the Debtors cannot maintain a minimal standard of living for themselves and their dependents if he is forced to repay the DOE student loans.
Debtors tithe $430 per month to their church. Fulbright testified that tithing is an integral part of his family’s religion, an integral “step of faith” whereby other things become possible. The Court respects Debtors’ religious convictions, but Fulbright testified that tithing is voluntary and not required for his family’s membership in their church.
A split of authority exists on the issue of whether charitable contributions such as tithing are reasonable expenses for purposes of determining undue hardship under § 523(a)(8). Judge Haines in
Educational Credit Management Corp. v. Savage (In re Savage),
In undue hardship analysis, most courts employ the same model as is used to determine “disposable income” for Chapter 13 plan confirmation purposes. See § 1325(b)(2); see, e.g., Sequeira v. Sallie Mae Servicing Corp. (In re Sequeira),278 B.R. 861 , 865 (Bankr.D.Or.2001); Peel v. SallieMae Servicing-Heal Loan (In re Peel),240 B.R. 387 (Bankr.N.D.Cal.1999); Brown v. Salliemae Servicing Corp. (In re Brown),227 B.R. 540 (Bankr.S.D.Cal.1998). Although the problems are similar (ascertaining whether there are sufficient resources to fund payments), the objects (disposable income for plan confirmations vs. payment without undue hardship) differ. Under § 1325, a debtor is generally not required to alter reasonable lifestyle choices. See, e.g., In re Woodman, 287 B.R. 589 (Bankr.D.Me.2003) (citing Keith M. Lundin, Chapter 13 Bankruptcy § 165.1, at 165-1 (3d ed.2000)); In re Tibbs,242 B.R. 511 , 516 (Bankr.N.D.Ala.1999) (court examining disposable income “is not expected to, and should not, mandate dramatic changes in the debtor’s lifestyle to fit some preconceived norm for chapter 13 debtors”); In re Sitarz,150 B.R. 710 , 718 (Bankr.D.Minn.1993) (when examining disposable income, courts need not require the debtor to lower his expenses to poverty level). 8 The same can be said of § 707(b) analysis, which generally focuses on the availability of sufficient disposable income to fund a Chapter 13 plan.
Under § 523(a)(8), the debtor’s lifestyle (particularly expenses) is subjected to more rigid scrutiny. Courts differ on the degree of scrutiny applied, or, more precisely, on how much hardship a debt- or can be expected to bear before it becomes “undue.” But deference to a debtor’s lifestyle choices is, to put it kindly, muted. See, e.g., In re Mathews,166 B.R. 940 , 945 (Bankr.D.Kan.1994) (“Ordinary ‘garden variety’ hardship does not suffice for purposes of § 523(a)(8), and debtor ‘must show that the combination of the low income and exceptional circumstances is so severе and oppressive that there is no way that the debtor will ever be able to repay the debt and maintain a minimal standard of living’ ”); In re Rappoport,16 B.R. 615 , 617 (Bankr.D.N.J.1981) (discharge under § 523(a)(8) requires “total incapacity now and in the future to pay one’s debts for reasons not within the control of the individual debtor”); see also Penn. Higher Educ. Assistance Agency v. Faish (In re Faish),72 F.3d 298 , 305-06 (debtor entitled to live in something more than “abject poverty,” but must show “she could not maintain a minimal standard of living if forced to repay her loans” which is a showing of something more than “tight finances”). Eliminating some expenses that would be considered legitimate under § 1325 might well be done without creating “undue” hardship. See generally [In re] Kopf, 245 B.R. [731] at 743-44 [(Bankr.D.Me.2000)] (discussing the notion of “undue” hardship).
As discussed above, courts have diverged on the issue of tithing in the undue hardship context imposed by 11 U.S.C. § 523(a)(8).
Compare Ritchie v. Northwest Education Loan Ass’n (In re Ritchie),
The court in
Meling,
In the instant case, the Court concludes that Fulbright’s monthly tithe of $430 is not de minimis, or modest and reasonable under the circumstances, and consistent with Ritchie, is a significant charitable donation not reasonably neсessary for the maintenance and support of the Debtors or their dependents, and is per se unreasonable when not required for membership. It is fully 10% of the Debtors’ income at $430 per month. Fulbright declined the Court’s suggestion that a lesser contribution could satisfy his tithing obligation, testifying that tithing is by definition 10%. Furthermore, Fulbright admitted that tithing is not required for participation in his church, although he deeply believes it is important.
Fulbright cites
McLaney v. KHEAA,
Under the facts of this case, this Court agrees with Judge Papрas in
Ritchie
that the plain language of § 523(a)(8) makes no reference at all to treatment to be given religious or charitable contributions in making undue hardship determinations, while elsewhere in the Code the topic of charitable contributions is specifically addressed.
Ritchie,
If Congress enacted into law sоmething different from what it intended, then it should amend the statute to conform it to its intent. “It is beyond our province to rescue Congress from its drafting errors, and to provide for what we might think ... is the preferred result.” United States v. Granderson,511 U.S. 39 , 68[,114 S.Ct. 1259 ,127 L.Ed.2d 611 ] (1994) (concurring opinion). This allows both of our branches to adhere to our respected, and respective, constitutional roles. In the meantime, we must determine intent from the statute before us.
Lamie v. United States Trustee,
This Court respectfully declines to follow Judge Williams’s reasoning in
McLaney.
First, it goes against the canon of statutory construction quoted above,
Bates v. United States,
The first prong of the
Brunner
test requires that the debtors show they cannot repay thеir student loans and maintain a minimal standard of living.
Pena,
If Fulbright applied for the William D. Ford Program and consolidated his loans under the income contingent repayment plan, depending on Debtors’ adjusted gross income and the applicable HHS Poverty Guidelines, their required payment may be expected to be reduced well below the $950 per month payment which Fulbright testified would be required over 10 years, thus having little impaсt on Debtors’ standard of living. Hiltz, 20 Mont. B.R. at --. The absence from the record of any evidence on this point must weigh against the party with the burden of proof, Fulbright.
For these reasons, the Court concludes that Fulbright has failed to satisfy the first prong of the
Brunner
test and therefore the student loans owed to DOE cannot be discharged on grounds of undue hardship.
Rifino,
II. Third Prong.
The third
Brunner
prong requires that the debtor has made good faith efforts to repay the student loans.
Pena,
DOE filed Proof of Claim No. 6 in Fulbright’s Chapter 7 bankruptcy case on March 1, 2004, asserting a claim in the amount of $85,992.70. The Debtors did not file an objection. This Court discussed the applicable law governing the burden of proof for allowance of сlaims in
In re
A validly filed proof of claim constitutes prima facie evidence of the claim’s validity and amount. F.R.B.P. 3001(f). The Ninth Circuit recently explained the general procedure for allocating burdens of proof and persuasion in determining whether a filed claim is allowable in Lundell v. Anchor Const Specialists, Inc.,223 F.3d 1035 , 1039 (9th Cir.2000):
A proof of claim is deemed allowed unless a party in interest objects under 11 U.S.C. § 502(a) and constitutes “prima facie evidence of the validity and amount of the claim” pursuant to Bankruptcy Rule 3001(f). See also Fed. R. Bankr.P. 3007. The filing of an objection to a proof of claim “creates a dispute which is a contested matter” within the meaning of Bankruptcy Rule 9014 and must be resolved after notice and opportunity for hearing uрon a motion for relief. See Adv. Comm. Notes to Fed. R. Bankr.P. 9014.
Upon objection, the proof of claim provides “some evidence as to its validity and amount” and is “strong enough to carry over a mere formal objection without more.” Wright v. Holm (In re Holm),931 F.2d 620 , 623 (9th Cir.1991) (quoting 3 L. King, Collier on Bankruptcy § 502.02, at 502-22 (15th ed.1991)); see also Ashford v. Consolidated Pioneer Mart (In re Consol. Pioneer Mart),178 B.R. 222 , 226 (9th Cir. BAP 1995), aff'd,91 F.3d 151 ,1996 WL 393533 (9th Cir.1996). To defeat the claim, the objector must come forward with sufficient evidence and “show facts tending to defeat the claim by probative force equal to that of the allegations of the proofs of claim themselves.” In re Holm,931 F.2d at 623 .
:{; * * *
“If the objector produces sufficient evidеnce to negate one or more of the sworn facts in the proof of claim, the burden reverts to the claimant to prove the validity of the claim by a preponderance of the evidence.” In re Consol. Pioneer,178 B.R. at 226 (quoting In re Allegheny Int’l, Inc.,954 F.2d 167 , 173-74 (3d Cir.1992)). The ultimate burden of persuasion remains at all times upon the claimant. See In re Holm,931 F.2d at 623 .
See also Knize,210 B.R. at 778 ; Matter of Missionary Baptist Foundation of America,818 F.2d 1135 , 1143 (5th Cir.1987); In re Stoecker,143 B.R. 879 , 883 (N.D.Ill.1992), aff'd in part, vacated in part, 5 F.3d 1022 (7th Cir.), reh’g denied (1993).
Thus, the Bank’s Proof of Claim No. 2 is prima facie evidence of the validity and amount of its claim under Rule 3001(f), and the Debtor has the burden of showing sufficient evidence and to “show facts tending to defeat the claim by probative force equal to that of the allegations of the proofs of claim themselves.” Lundell,223 F.3d at 1039 (quoting Holm). This Court finds that Eric, as the objecting party, has not produced sufficient еvidence to cause the burden to revert to the Bank to prove the validity and amount of its claim. Lundell,223 F.3d at 1039 (quoting In re Consol. Pioneer,178 B.R. at 226 ).
The analysis under
Lundell
was reiterated by the Ninth Circuit in
In re Los Gatos Lodge, Inc.,
Fulbright for years disputed the DOE’s right to capitalize the interest, and refused to avail himself of available income contingent repayment plans because of his dispute, during which period interest continued to accrue. Ultimately, Fulbright failed to object to DOE’s Proof of Claim and prove his arguments in accordance with applicable rules of procedure in a timely manner, with the result that Fulbright must be deemed to have failed his burden of proof. By failing to accept invitations to enroll in the William D. Ford Program which were offered to him, and failing in the end to properly raise or prove his allegations against DOE’s claim for interest, the Court finds that Fulbright failed his burden of proof under the good faith third Brunner prong.
Fulbright having failed to satisfy the first and third Brunner prongs, he has failed the burden of proof to show undue hardship under § 523(a)(8) to discharge his student loans to DOE.
CONCLUSIONS OF LAW
1. This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334 and 157.
2. This is a core proceeding to determine the dischargeability of educational loans under 28 U.S.C. § 167(b)(2)(I) and 11 U.S.C. § 523(a)(8).
3.Plaintiff failed to satisfy his burden of proof under § 523(a)(8) by a preponderance of the evidence. In particular, Plaintiff failed to satisfy the first prong of the test set forth in
Brunner,
IT IS ORDERED a separate Judgment shall be entered in this adversary proceeding for the Defendant United States Department of Education, dismissing Plaintiffs dischargeability complaint.
Notes
. The oldest child, Mara, is a full time student at Brigham Young University in Provo, Utah.
. The approved Pretrial Order, p. 4, and Plaintiff’s pretrial memorandum filed October 29, 2004 (docket # 17), at p. 3, itemize Debtors average expenses as $1,158 mortgage, $244 utilities, $60 phone, $86 cell phone, $425 transportation, $236 auto insurance, $600 food, $216 installment payment on a loan secured by their 1994 pickup, $430 tithing, $18 dry cleaning, $37 clothing, $126 property taxes, $42 homeowners’ insurance, and $36 recreation (Gymkhana), for a total of $3,714.
. The $430 tithe is computed at ten percent (10%) of Fulbright’s and April’s combined incomes.
. Ex. 2, a statement from ACS Inc., states a total balance of $106,527.51 as of May 22, 2003. Ex. 3 states the amount due as $92,154.08 as of July 26, 2001.
. Faatalale’s Declaration does not have numbered pages.
. Faatalale's reference to Chapter 13 is wrong. Debtors filed a Chapter 7 bankruptcy case, and the Trustee's final report filed October 15, 2004, shows the $1,672.47 paid to DOE.
. Thе $162,257.00 claim of the Sinclairs listed on Schedule D has been paid off with the loans from Debtors' payments. Other than the IRS’s tax lien, the record shows that Debtors' home is unencumbered by any perfected security interests.
. But see In re Sutton, 19 Mont. B.R. 220 (Bankr.D.2001) (monthly cigarette expense of $190 not reasonably necessary when no evidence presented that the expense was reasonably necessary).
. The Eighth Circuit follows the less restrictive "totality of circumstances” approach to the undue hardship inquiry and does not follow the Brunner test. See Long v. Educational Credit Management Corp., 322 F.3d 549, 554 (8th Cir.2003).
. It must be noted, notwithstanding the hardship to their parents, that Debtors'