With over $1 trillion of student loan debt accumulated nationally, it is unsurprising that some debtors are confronted with insurmountable student debt. While discharging student loan debt is a challenge, it is not insurmountable. In the case of United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010), the Supreme Court of the United States ruled that a debtor's student loans in the amount of $17,832 were dischargeable in a chapter 13 bankruptcy case. Although the facts of such case were highly specific and may not apply to your situation, you need to consult to attorney to protect your rights under the Bankruptcy Code.
In determining whether student loans are dischargeable, many courts will first examine the relevant statutory provision of 11 U.S.C. § 523(a)(8) and typically, the case of Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987). Specifically, § 523(a)(8) states the following:
“(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 –unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for –
(A)(i) 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
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual[.]”
The key statutory phrase that normally limits a bankruptcy court's ability to discharge student loans is that such debt must “impose an undue hardship.” Congress designed this provision “to remedy an abuse by students who, immediately upon graduation, filed petition for bankruptcy and obtained a discharge of their educational loans.” Andrews University v. Merchant (In re Merchant), 958 F.2d 738, 749 (6th Cir. 1992). In Brunner, the Second Circuit developed a three-part test (the “Brunner test”) to determine whether a student loan is actually an “undue hardship.” Those three factors are the following:
(1) 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.
Implicit in the test of § 523(a)(8) and discharging student loans is the understanding that a debtor must demonstrate “more than temporary financial adversity.” Tennessee Student Assistant Corp. v. Hornsby (In re Hornsby), 144 F.3d 433 (6th Cir. 1998).
In fact, one measure of determining the likelihood of discharging your student loans is by examining the facts of other debtors who had their student loan debts discharged. In Oyler v. Educational Mgmt. Credit Corp. (In re Oyler), 397 F.3d 382, 386 (6th Cir. 2005), the Sixth Circuit made it clear that there must be “a certainty of hopelessness, not merely a present inability to fulfill financial commitment. They may include illness, disability, a lack of useable job skills, or the existence of a large number of dependents. And, most importantly, they must be beyond the debtor's control, not borne of free choice.” As such, a frequent consideration for courts is the type of physical ailment that a debtor possesses.
Blindness
In Larson v. United States (In re Larson), 426 B.R. 782 (Bankr. N.D. Ill. 2010), the court found that the blindness of a debtor would qualify as a sufficient physical disability to grant a discharge of student loan debt. Id. at 796. The court described the facts of the case by writing, “[The debtor, who is blind] works at Nicor gas as a customer service representative, monitoring sales calls. He has worked there since 1999, and is able to use specialized computer software to overcome his blindness. He has a guide dog, and commutes by public bus or by taxi when the bus is not running[.]” Id. at 788.
However, in Wallace v. Educational Credit Mgmt. Corp. (In re Wallace), 443 B.R. 781, 790 (Bankr. S.D. Ohio 2010), a debtor did not receive a discharge even though he was legally blind. The court specifically wrote, “As to [the debtor's] future prospects, it bears noting that he is intelligent and has a bachelor's degree in sociology. In addition, he is now a few years removed from having undergone multiple surgeries, and his physical condition appears to have stabilized. On the other hand, there is no doubt that he faces significant obstacles resulting from his blindness. It remains to be seen into which group [the debtor] will land, whether he will find work or remain unemployed.”
Heart Condition
In Limkemann v. United States Dep't of Education (In re Limkemann), 314 B.R. 190 (Bankr. N.D. Iowa 2004), the court had to determine whether a debtor with a heart condition demonstrated sufficient “undue hardship” under § 523(a)(8). The court wrote, “Debtor suffers from a condition called atrial fibrillation with atrial flutter, which is essentially an irregular heartbeat.” Id. at 193. Looking at the totality of the circumstances, including the Debtor's medical condition, employment history, and earning capacity, the court determined that “he [was] unable to meet his obligations as they become due” and discharged his student loans. Id. at 197.
Amputation
In Dockery v. Merchants & Planters Bank (In re Dockery), 36 B.R. 41, 42 (Bankr. E.D. Tenn. 1984), the court held that a debtor who “was injured in an accident which resulted in the amputation of his left leg at knee level” demonstrated an “undue hardship” and deserved a discharge of his student loans.
Mental Depression
In Feenstra v. New York State Higher Educations Services Corp. (In re Feenstra), 51 B.R. 107 (Bankr. W.D.N.Y. 1985), the court held that a debtor's student loans could be discharged when: the debtor could not pay loans despite continuing to work, the debtor described herself as an “emotional basket case,” and the debtor had four dependent children were all recovering alcoholics and drug addicts.
Sleep Apnea, Chronic Fatigue, Hypothyroidism
In Nightingale v. North Carolina State Education Assistance Authority (In re Nightingale), 548 B.R. 431 (Bankr. M.D. N.C. 2016), the debtor received a discharge of her student loans after the court considered that she was eligible for total disability from her teaching job and was diagnosed with sleep apnea, chronic fatigue, and hypothyroidism. Id. at 433–34.
Arthritis
In Love v. United States (In re Love), 33 B.R. 753, 754 (Bankr. E.D. Va. 1983), the court refused to give the debtor a complete discharge even though she suffered from “arthritis and extreme sensitivity to perceived stress as a result of an old head injury.”
Diabetes, Depression, Obesity, and Back Pain
In Neal v. New Hampshire Higher Education Assistance Foundation (In re Neal), 354 B.R. 583 (Bankr. D. N.H. 2006), the court ruled in favor of a debtor who was “permanently disabled and suffering from a list of health problems, including diabetes, obesity, and chronic back pain.” Id. at 587. In addition, the debtor needed “help with tasks such as dressing, showering, and cooking, and that he [was] unable to stand for any significant period of time.” Id. Accordingly, the court discharged the student loan debts under § 523(a)(8) and the “undue hardship” test.
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