In re: ROSEMARY RIFINO, Debtor. ROSEMARY RIFINO, Plaintiff-Appellant, v. UNITED STATES OF AMERICA; SALLIE MAE; UNIVERSITY OF WASHINGTON; NORTHWEST EDUCATION LOAN ASSOCIATION; WILLIAM D. FORD FEDERAL DIRECT LOAN, Defendants-Appellees.
No. 99-35378
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
April 13, 2001
Amended May 10, 2001
245 F.3d 1083
Argued and Submitted Feb. 12, 2001. Filed April 13, 2001.
Peter S. Holmes, Miller, Nash, Wiener, Hager & Carlsen, LLP, Seattle, Washington, for the plaintiff-appellant.
Diane Tebelius, Assistant United States Attorney, Seattle, Washington; Bruce Fine, Aiken & Fine, P.S., Seattle, Washington; Donivan R. Irby, Office of the Attorney General, Seattle, Washington; Joann L. Pheasant, Attorney General‘s Office, Social & Health Services, Olympia, Washington, for the defendants-appellees.
Appeal from the United States District Court for the Western District of Washington; Barbara J. Rothstein, Chief District Judge, Presiding. D.C. No. CV-97-01860-R.
Before: Stephen Reinhardt, Kim McLane Wardlaw, and Ronald M. Gould, Circuit Judges.
GOULD, Circuit Judge:
1 This case involves the undue hardship provision of
FACTS AND PROCEDURAL BACKGROUND
2 At the time of the bankruptcy adversary proceeding, Rifino was forty-one years old, and a single mother with a ten-year-old son. Rifino earned a Bachelor of Science degree from the University of Oregon in 1991 and a Master of Social Work (“MSW“) degree from the University of Washington in 1994. Rifino financed her education by acquiring federally insured student loans totaling approximately $ 69,000 from various lenders, including Sallie Mae, the University of Oregon, the Oregon State Scholarship Commission, the University of Washington, the Northwest Education Loan Association, and the William D. Ford Federal Direct Loan Program. Most of Rifino‘s student loans obligations did not go into repayment status until August 1996.
3 At the time of the adversary proceeding, Rifino was a social worker at Ryther Child Center, earning a gross annual salary of $ 27,591.36 and a net monthly salary of $ 1,898. Rifino‘s stated monthly expenses totaled approximately $ 1,897, and included tanning salon visits, cable television, a new car payment, and expenses related to her son‘s enrollment at Seattle Country Day School, a private elementary school. Although Rifino‘s son had a partial scholarship to this school, the cost of tuition and fees not covered by the scholarship totaled $ 1,780 for the 1993-1994 academic year and $ 1,400 for the 1994-1995 academic year. These expenses were in addition to child care expenses. Rifino has paid for her son to participate in Aikido, swimming lessons, skating lessons, Little League, and cross country-CYO. Rifino‘s stated monthly expenses did not include child care during school breaks, clothing, or maintenance for her car.
4 Rifino filed a Chapter 7 bankruptcy petition in June 1996 seeking to discharge her consumer debt. The petition was granted on September 16, 1996. On September 17, 1996, Rifino commenced an adversary proceeding seeking an undue hardship discharge of her student loan obligations under
5 The adversary proceeding was tried before the bankruptcy court on September 23-24, 1997. The bankruptcy court entered judgment in favor of Rifino, ruling that Rifino would suffer an undue hardship if her student loans were not discharged.
6 All defendants timely appealed, electing to have their appeals reviewed by the district court as opposed to a bankruptcy appellate panel. See
7 The district court reversed the bankruptcy court‘s discharge order and reinstated Rifino‘s student loan debt. Addressing the “undue hardship” discharge provision of
8 Rifino now appeals.
I
9 “Because this court is in as good a position as the district court to review the findings of the bankruptcy court, it independently reviews the bankruptcy court‘s decision.” Ragsdale v. Haller, 780 F.2d 794, 795 (9th Cir. 1986). We review the bankruptcy court‘s findings of fact under a clearly erroneous standard. In re Pena, 155 F.3d 1108, 1110 (9th Cir. 1998). “Where there are two permissible views of the evidence, the factfinder‘s choice between them cannot be clearly erroneous.” Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 574, 84 L. Ed. 2d 518, 105 S. Ct. 1504 (1985). We review de novo the bankruptcy court‘s application of the legal standard in determining whether a student loan debt is dischargeable as an undue hardship. In re Taylor, 223 B.R. 747, 750 (B.A.P. 9th Cir. 1998).
II
10 Rifino contends that the district court improperly substituted its judgment2 for that of the bankruptcy court by concluding that she failed to establish that repayment of her student loans would present an “undue hardship.” We find Rifino‘s arguments unpersuasive.
11 Generally, student loan obligations are presumed to be nondischargeable in bankruptcy pursuant to
12 A discharge under section 727 ... does not discharge an individual debtor from any debt -- 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.
13
14 To determine if excepting student loans from discharge will create an undue hardship on a debtor, the Ninth Circuit has adopted the three-part test established by the Second Circuit in Brunner. See Pena, 155 F.3d at 1112. To obtain a discharge of a student loan obligation, the debtor must prove:
15 (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 debtor has made good faith efforts to repay the loans.
16 Brunner, 831 F.2d at 396. Under this test, the burden of proving undue hardship is on the debtor, and the debtor must prove all three elements before discharge can be granted. In re Faish, 72 F.3d 298, 306 (3d Cir. 1995). If the debtor fails to satisfy any one of these requirements, “the bankruptcy court‘s inquiry must end there, with a finding of no dischargeability.” Id.
17 The first prong of the Brunner test requires the debtor to prove that she “cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her dependents if forced to repay the loans.” Brunner, 831 F.2d at 396. To meet this requirement, the debtor must demonstrate more than simply tight finances. In re Nascimento, 241 B.R. 440, 445 (B.A.P. 9th Cir. 1999) (citation omitted). “In defining undue hardship, courts require more than temporary financial adversity, but typically stop short of utter hopelessness.” Id. (citation omitted).
18 In this case, the bankruptcy court found that Rifino was “barely living within a minimal standard” and that “there are no excess funds in her budget which could be used for repayment of the loans.” The bankruptcy court also noted that while “it is conceivable that [Rifino] could reduce some of the items in her budget, ... such reductions would be minimal and inconsequential.”
19 NELA, Sallie Mae, the United States, and the University of Washington (collectively “appellees“) contend that the bankruptcy court‘s findings are clearly erroneous because Rifino‘s budget contains unnecessary items such as tanning, cable television, and a new car. Appellees contend that because Rifino‘s budget does not constitute a minimal standard of living, the bankruptcy court clearly erred in granting Rifino a discharge of her student loan debt.
20 Some courts have declined to discharge student loan debt where the debtor‘s budget included items such as cable television, a new car, and private schooling for a child. See Commonwealth of Va. State Educ. Assistance Auth. v. Dillon, 189 B.R. 382, 385-86 (Bankr. W.D. Va. 1995) (denying discharge of educational debt and finding debtor incurred $ 35 per month on cable television); Faish, 72 F.3d at 307 (rejecting claim of undue hardship by debtor who wanted to buy a car rather than continue to take the bus); Perkins v. Vermont Student Assistance Corp., 11 B.R. 160, 161 (Bankr. D. Vt. 1980) (finding that purchase of new car was self-imposed hardship); In re Conner, 89 B.R. 744, 749 (Bankr. N.D. Ill. 1988) (finding that choosing to send children to private school was self-imposed hardship). However, while a number of courts have declined to discharge student loan obligations in such circumstances, and though a close question is presented, the bankruptcy court‘s refusal to do so here is not necessarily clearly erroneous. See Anderson, 470 U.S. at 574 (“Where there are two permissible views of the evidence, the factfinder‘s choice between them cannot be clearly erroneous.“).
21 We conclude that the bankruptcy court did not clearly err in finding that Rifino‘s standard of living would fall below a minimal level if she were required to repay her student loans.
B
22 The second prong of the Brunner test requires a debtor to prove 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. We have explained that this 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 nonexcepted debt. ‘” Pena, 155 F.3d at 1111 (quoting Brunner, 831 F.2d at 396).
23 In discharging Rifino‘s student loan obligations, the bankruptcy court reasoned:
24 Next, as to whether the debtor‘s present financial circumstances are likely to persist in the future or during the repayment period ... certainly, on the evidence, if the debtor remains in her present employment, her circumstances are not likely to improve.
25 This factual finding is not supported by the record and is clearly erroneous.
26 At Rifino‘s adversary proceeding, Dr. John Longris (“Dr. Longres“), the Associate Dean for Curriculum and Student Affairs at the University of Washington School of Social Work, testified generally about the earning potential of individuals employed as social workers. Dr. Longres explained that although salaries for social workers tend “to stay a little flat over the beginning years of the career,” salaries typically increase after approximately five years of employment. After gaining experience, social workers with MSW degrees often move into administrative positions, with annual salaries ranging from $ 47,000 to $ 65,000, or private practice, with annual salaries up to $ 75,000. Dr. Longres also testified that numerous opportunities for advancement exist for individuals with a MSW degree, including supervisory roles, agency administration, policy analysis, policy development and implementation at state and federal levels, and private practice.
27 The record demonstrates that at the time of the adversary proceeding, Rifino was a professionally employed social worker at Ryther Child Center, earning a gross annual salary of $ 27,591.36. At that time, Rifino was only three years into her employment as a social worker and had already received two salary increases. Given the uncontested testimony of Dr. Longres, we hold that the bankruptcy court clearly erred in concluding that Rifino‘s circumstances are likely to persist for a significant portion of the repayment period of her student loans.4
28 Rifino failed to prove that her present circumstances are likely to persist for a significant portion of the repayment period of her student loans. We hold that Rifino‘s student loans are not dischargeable pursuant to
29 AFFIRMED.