In re: ROSE A. TIRCH, Debtor. ROSE A. TIRCH, Plaintiff-Appellee, v. PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, Defendant-Appellant.
No. 04-3125
United States Court of Appeals for the Sixth Circuit
June 3, 2005
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206. File Name: 05a0242p.06. On Appeal from the Bankruptcy Appellate Panel of the Sixth Circuit. No. 00-54083—Barbara J. Sellers, Bankruptcy Judge; William T. Bodoh, Bankruptcy Appellate Panel Judge. Argued and Submitted: February 1, 2005. Decided and Filed: June 3, 2005. Before: SILER, BATCHELDER, and DAUGHTREY, Circuit Judges.
COUNSEL
ARGUED: Donald J. Rafferty, COHEN, TODD, KITE & STANFORD, Cincinnati, Ohio, for Appellant. ON BRIEF:
OPINION
ALICE M. BATCHELDER, Circuit Judge. Defendant-Appellant Pennsylvania Higher Education Assistance Agency (“PHEAA“) appeals the Bankruptcy Appellate Panel‘s (“BAP“) order affirming the bankruptcy court‘s order granting partial discharge of Plaintiff-Appellee Rose Tirch‘s student loan debt. Because the record does not support the bankruptcy court‘s findings that Tirch‘s ailments preclude her return to work and are likely to persist for a significant portion of the repayment period, or that she made a good faith effort to pay back her student loans, we will REVERSE.
Tirch, a single female in her mid-40s, holds a B.A. in Counseling, which she received in the mid-1980‘s and a Master‘s Degree in Counseling, which she received in 1998. Tirch financed her education through a total of 17 loans provided by PHEAA and owed an aggregate balance of $84,604.65 as of June 19, 2001, with interest accruing at a rate of $558.08 per month. As of the filing of this appeal, Tirch, who first defaulted on her loans on October 24, 2000, had made $3,072.75 in payments on the loans and had arranged for her alma mater, Franciscan University of Steubenville, to make a charitable payment of $1,850.77.
After receiving her Master‘s Degree, Tirch worked in various counseling positions and earned about $27,000 in 1999, $
Sometime in 2000—Tirch does not provide us with the date—Tirch filed for protection under
Applying the three-part test announced by the Second Circuit in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987), the bankruptcy court granted Tirch a partial discharge of her student loan debt, holding that requiring Tirch to pay her student loans in an amount in excess of $200.00 per month once she returns to work and earns a salary of at least $20,000 per year would impose an undue hardship. The bankruptcy court‘s order allows Tirch to discontinue payments at age 65 in any eventuality. The BAP affirmed the bankruptcy court‘s order. PHEAA timely appealed.
We focus our review of cases appealed from the BAP on the bankruptcy court‘s decision, examining findings of fact for clear error, and conclusions of law de novo. In re Palmer, 219 F.3d 580, 583 (6th Cir. 2000). Whether the repayment of student loans would impose an undue hardship on the debtor is a question of law that we review de novo. In re Cheesman, 25 F.3d 356, 359 (6th Cir. 1994).
The
Because “undue hardship” is not defined by the
(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.
Brunner, 831 F.2d at 396. Because PHEAA concedes that under her current circumstances, Tirch cannot maintain a
To demonstrate that the debtor‘s current “state of affairs is likely to persist for a significant portion of the repayment period of the student loans,” as required by Brunner‘s second prong, the debtor must precisely identify her problems and explain how her condition would impair her ability to work in the future. In re Brightful, 267 F.3d 324, 330 (3d Cir. 2001); In re Paolini, No. 95-3516, 1997 WL 476515 at * 5 (6th Cir. Aug. 19, 1997). The dischargeability of loans should be based upon “a certainty of hopelessness, not merely a present inability to fulfill financial commitment.” Oyler, 397 F.3d at 386 (quoting In re Roberson, 999 F.2d 1132, 1136 (7th Cir. 1993)). Tirch has not made this showing.
Tirch testified that she continues to experience problems arising from her rectal surgery, including irregularity and loss of taste, but she did not provide evidence that these physical problems would preclude her from working. Instead, she explained that “[a]t this point I can‘t help somebody else when I can‘t help myself and no one can help me. So I don‘t feel I can be in the counseling field or social work field at this time and I‘m not even functioning in my own home.” When pressed, she explained further,
If my taste returns, which is my biggest difficulty that I‘m having, which people may see as simple, but it‘s not . . . . So I don‘t believe I can return to work any time soon. If I don‘t have the - - the return of my taste, I don‘t know how I‘m going to cope long term to be able to get back to work in any capacity, I don‘t know.
Neither has Tirch provided evidence sufficient to demonstrate that her psychological conditions preclude her return to work. Her assertion that “I went through post-traumatic stress when I went to work at the State of West Virginia as a social worker” is certainly not sufficient. Tirch should have sought employment in another field when the stress of clinical social work became debilitating. See Paolini, 1997 WL 476515 at *6 (“while [the debtor‘s] struggle with [obsessive compulsive disorder] makes her unsuited for work in the stressful environment of a large law firm, there are a plethora of legal jobs [the debtor] has not yet explored“); see also In re Hafner, 303 B.R. 351, 356 (Bankr. S.D. Ohio 2003). The remainder of Tirch‘s testimony relating to her claim that she is unable to work is simply a recitation of incidents of stress occurring over a period of several years, unsupported by competent medical or psychological evidence. We have no occasion to delve into the BAP‘s holding that the bankruptcy court‘s assessment of the debtor‘s testimony regarding her mental and emotional health is sufficiently reliable to support the bankruptcy court‘s findings in that regard, without the necessity of expert corroboration, because the bankruptcy court made no such assessment. Indeed, the bankruptcy court provided no factual basis whatsoever for its bald conclusion that Tirch had met all three prongs of the Brunner test.
Nor did Tirch provide evidence that these problems would “persist for a significant portion of the repayment period of the student loans.” Brunner, 831 F.2d at 396. When asked if she would be able to return to work, Tirch responded,
Not at this time. And I don‘t know when this would be. It could be a year, it could be two years. I don‘t know how I‘m going to cope if I have complete [loss of taste] forever. I really at this
time can‘t and I know it‘s - it could be six months to a year if I don‘t - - if [my sense of taste] returns, I could.
Nothing in Tirch‘s statements and nothing in the record as a whole provides any “certainty of hopelessness,” Oyler, 397 F.3d at 386, or any basis for concluding that Tirch‘s current condition will persist for any appreciable period. Indeed, we are hard-pressed to discern, either from any of these statements or from the entire record, how her condition prevents her from working now, let alone in the future.
The facts of Tirch‘s case are similar to those in In re Burton, 117 B.R. 167 (Bankr. W.D. Penn. 1990), in which a 33-year-old debtor with a four-year college degree testified that he suffered from Epstein-Barr Syndrome (the virus that causes, among other things, infectious mononucleosis), a severe bowel disorder, depression, and a lack of concentration, and presented unauthenticated letters from a doctor, which purported to corroborate his testimony. The court held that the debtor did not demonstrate undue hardship because he “failed to show what the long-term deleterious effects of the disease are; that he can be expected to suffer those effects during the next ten (10) years or so; or, that this condition will prevent him from being gainfully employed during that time.” Id. at 171. Like the debtor in Burton, Tirch has failed to prove that her ailments preclude her return to work and will persist for a significant portion of the repayment period.
Tirch has also failed to show that she made a good faith effort to repay the loans, as required by the third prong of the Brunner test. We begin our good faith analysis with Tirch‘s decision not to avail herself of the William D. Ford ICR. The bankruptcy court in In re Korhonen, 296 B.R. 492, 496 (Bankr. D. Minn. 2003), explained the mechanics of the ICR:
The Income Contingent Repayment Program permits a student loan debtor to pay twenty percent of the difference between his adjusted gross income and the poverty level for his family size, or the amount the debtor would pay if the debt were repaid in twelve years, whichever is less. Under the program, the borrower‘s monthly repayment amount is adjusted each year to reflect any changes in these factors. The borrower‘s repayments may also be adjusted during the year based on special circumstances. See
34 C.F.R. § 685.209(c)(3) . At the end of the twenty five year payment period, any remaining loan balance would be cancelled by the Secretary of Education. However, the amount discharged would be considered taxable income.
While not a per se indication of a lack of good faith, see Educational Credit Management Corp. v. Polleys, 356 F.3d 1302, 1311 (10th Cir. 2004), Tirch‘s decision not to take advantage of the ICR is probative of her intent to repay her loans. See Brunner, 831 F.2d at 397. In cases involving a partial discharge of student loans, “it is a difficult, although not necessarily an insurmountable burden for a debtor who is offered, but then declines the government‘s income contingent repayment program, to come to this Court and seek an equitable adjustment of their student loan debt.” In re Swinney, 266 B.R. 800, 806-07 (Bankr. N.D. Ohio 2001) (citing In re Ritchie, 254 B.R. 913, 923 (Bankr. D. Idaho 2000) and In re Douglass, 237 B.R. 652, 657 (Bankr. N.D. Ohio 1999)); see also In re Storey, 312 B.R. 867, 875 (Bankr. N.D. Ohio 2004); In re Alderete, 289 B.R. 410, 420 (Bankr. D.N.M. 2002).
The BAP determined that Tirch‘s failure to avail herself of the ICR was not probative of her good faith because her payments under the plan would be $597.34 per
Under the ICR, the annual amount payable by the student is the lesser of,
(i) The amount the borrower would repay annually over 12 years using standard amortization multiplied by an income percentage factor that corresponds to the borrower‘s adjusted gross income (AGI) as shown in the income percentage factor table in a notice published annually by the Secretary in the FEDERAL REGISTER; or
(ii) 20 percent of discretionary income.
Because Tirch declined to take advantage of an ICR that would have been advantageous, she failed to sustain the heavy burden of proving that she made a good faith effort to repay her loans. Since the mid-1980‘s (when she received a B.A. financed by PHEAA loans), Tirch had paid only $4,093.52 (including Franciscan University‘s contribution) on a series of loans which reached an aggregate balance of $84,604.65 by June of 2001. Despite receiving her Master‘s Degree in 1998 (also financed by PHEAA loans) and making roughly $27,000 in 1999, $28,500 in 2000 and $27,500 in 2001, she defaulted on her loans by October of 2001. When viewed in the context of her demonstrable earned-income potential, the $4,093.52 that Tirch paid on her student loans in the 20 years since she received her B.A. is meager. Tirch has failed to satisfy the third prong of the Brunner test.
Because Tirch has failed to demonstrate that her circumstances meet the Brunner standard to qualify for an “undue hardship” partial discharge of her student loans, we REVERSE the decision of the BAP affirming the judgment of the bankruptcy court.