Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almb-1_05-ap-01039/USCOURTS-almb-1_05-ap-01039-0/pdf.json

Parties Involved:
Leon Thomas Mothershed
Plaintiff
United States Department of Education
Defendant
Benton H. Persons
Attorney

Document Text:

UNITED STATES BANKRUPTCY COURT

MIDDLE DISTRICT OF ALABAMA

In re Case No. 05-10341-DHW

Chapter 7

LEON THOMAS MOTHERSHED,

Debtor.

____________________________

LEON THOMAS MOTHERSHED,

Plaintiff,

v. Adv. Proc. No. 05-01039-DHW

UNITED STATES DEPARTMENT 

OF EDUCATION,

Defendant.

MEMORANDUM OPINION

Leon Thomas Mothershed filed a complaint under 11 U.S.C.

§ 523(a)(8) to determine the dischargeability of his student loan debt

to the United States Department of Education (“USDE”). 

Trial was held on January 12, 2006. Mothershed was represented

by Benton H. Persons, and USDE was represented by Patricia A.

Conover. 

Jurisdiction

The sources of the court’s jurisdiction in this adversary

proceeding are 28 U.S.C. § 1334 and the United States District Court

for this district’s general order of reference of title 11 matters to this

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court. Further, because an action to determine the dischargeability of

a particular debt is a core proceeding under 28 U.S.C. § 157(b)(2)(I),

this court’s jurisdiction is extended to the entry of a final order or

judgment. 

Findings of Fact

Mothershed is 46 years old. He is single, has no dependents, and

lives alone. Mothershed dropped out of high school at age 16. Later,

he joined the National Guard, where he completed his GED. 

In the late 1980s Mothershed attended a technical college in

Oklahoma where he earned a degree to work as an x-ray technician. 

He attended school less than a year. 

He financed this study through the student loans which are the

subject of this adversary proceeding. As of May 18, 2005, the

consolidated, unpaid balance of the student loans was $10,654.93. The

loan agreements required Mothershed to repay the debt over a period

of not more than 10 years from either his graduation or his failure to

enroll. The repayment period commenced in 1989. 

Mothershed was unable to find work as an x-ray technician in

Oklahoma, and he returned to Alabama. He has not sought work as an

x-ray technician in Alabama. Instead, he has worked as a laborer, a

shrimper, and a truck driver. 

In the early 1990s, Mothershed’s income was in the $7,000 to

$8,000 range. The highest hourly wage earned by Mothershed in the

early 1990s was $8.00. Some years he did not work at all.

When Mothershed filed for chapter 7 bankruptcy relief on

February 17, 2005, he was employed by the Alabama Farmers

Cooperative in Andalusia as a warehouse laborer, spreader, and truck

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In both 2003 and 2004 Mothershed earned approximately $17,500

through his job at the Coop. When he left the Coop he was earning $8.50 per

hour and working a 40-hour week. 

2 Mothershed’s leaving his job at the Coop was not entirely volitional.

He testified that he had been threatened by another employee and was

fearful for his personal safety. 

3 Plaintiff’s Exhibit G sets out Mothershed’s monthly expenses as of the

date of trial. They are itemized as follows: $250 rent, $150 utilities, $29

cable tv, $250 food, $150 transportation, $29 car insurance, and $50 medical

and dental.

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driver.1 USDE garnished $166.96 each month from his wages, and his

take-home pay averaged $794. His monthly expenses averaged $791.

Hence, Mothershed was able to meet his expenses, albeit with only a

meager surplus, while paying USDE $166.96 per month. 

Since filing for bankruptcy relief, significant changes have taken

place in Mothershed’s life. First, he left his job with the Farmers

Cooperative.2 Mothershed is leaving Alabama on Monday, January 16,

2006 to begin work with a new employer, C.R. Pate Logging. Through

C.R. Pate Logging, Mothershed will work in the Hurricane Katrina cleanup efforts within the State of Mississippi. He will earn a $100 per day

salary plus room and board. Mothershed is unsure how long this job will

last. 

Beyond the change in his employment, Mothershed has, since

filing the bankruptcy case, made changes in his personal life as well.

He is no longer living with his girlfriend, Nancy Spurlin, with whom he

cohabited and shared living expenses. Instead, he is living alone in a

rented duplex. 

As of the date of trial, Mothershed’s monthly expenses total

$908.3 These expenses, however, will be lowered once he begins work

for C.R. Pate Logging, which will pay his room and board. In addition,

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Mothershed testified that his expenses had actually gone down by $50

to $100 per month since he broke up with Spurlin due to the elimination

of demands made upon him by Spurlin and her family. 

Mothershed has never made voluntary payments toward his

student loan obligation. He contends that since graduation from

technical college, his income has been too low to permit any payment

to USDE. For a number of years, however, USDE has seized his income

tax refunds for application to the student loan debts. In addition, USDE

began garnish his wages at the Coop in 2002.

Conclusions of Law

The controlling Bankruptcy Code provision, 11 U.S.C. § 523(a)(8)

provides:

(a) A discharge under section 727. . . 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

exception such debt from discharge under this

paragraph will impose an undue hardship on the

debtor and the debtor’s dependents.

In an action under § 523(a)(8), there is a shifting burden of proof.

A creditor has the burden of proving “(1) the existence of a debt; (2)

for an educational loan; (3) made, insured, or guaranteed by a

governmental unit, or made under any program funded in whole or in

part by a governmental unit or non profit institution.” White v. United

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States (In re White), 243 B.R. 498, 505 (Bankr. N.D. Ala. 1999). Once

this initial burden is met, the burden shifts to the debtor to prove that

excepting the debt from discharge will impose an undue hardship.

D’Ettore v. Devry Institute of Technology (In re D’Ettore), 106 B.R.

715, 718 (Bankr. M.D. Fla. 1989).

Mothershed stipulates that the instant loans are of the type

described in 11 U.S.C. § 523(a)(8). Therefore, the only issue for the

court to determine is whether the debtor has met his burden of proof

with respect to the “undue hardship” exception.

The phrase “undue hardship” is not defined by the statute. In

Hemar Insurance Corporation of America v. Cox (In re Cox), 338 F.3d

1238, 1241 (11th Cir. 2003) the Court of Appeals for this circuit recently

adopted the three-part “undue hardship” test first enunciated by the

Second Circuit in Brunner v. New York State Higher Education Services

Corp., 831 F.2d 395 (2nd Cir. 1987).

Under Brunner, the debtor must prove (1) that he cannot repay

the loans and maintain, based on current income and expenses, a

minimal standard of living for himself and his dependants; (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.

Mothershed has not proven by a preponderance of the evidence

that he cannot repay the loans and maintain a minimal living standard.

Although his finances were constrained in the months preceding

bankruptcy, Mothershed paid the USDE $166 per month through

garnishment and still showed a small budget surplus at filing.

Mothershed is in a better position today to repay his student loan

debt than he was when he filed for bankruptcy relief. He is earning a

salary of $100 per day contrasted with $68 per day at the time of

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4 At the rate of $166 per month, the current balance on the student

loans can be repaid in a little over five years.

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bankruptcy. Further, while he no longer shares living expenses with

another, neither does he make contributions to Spurlin or her

household. Finally, Mothershed’s new employer will supply him with

room and board. As a result, expenses allocated for food, rent, and

utilities will be positively affected. 

All in all, the evidence shows that Mothershed had the ability to

repay his student loan debts at the time of bankruptcy. Changes in his

circumstances since bankruptcy make that result all the more likely.4

Without question, it will be hard for Mothershed to repay the

student loan obligations. His budget seems bare-boned and

conservative. Yet, difficulty of repayment is not enough to discharge

a student loan under § 523(a)(8). The hardship must be undue. United

Student Aid Funds, Inc. v. Nascimento (In re Nascimento), 241 B.R. 440,

445 (B.A.P. 9th Cir. 1999). Mothershed has not satisfied the court that

he cannot maintain a minimal standard of living if required to repay

these debts.

Conclusion

For the foregoing reasons the court holds that the student loan

debts owed by the debtor to the United States Department of Education

are due to be excepted from discharge. Pursuant to Fed. R. Bankr.

Proc. 9021, a judgment consistent with this opinion will enter

separately. 

Done this 19th day of January, 2006.

/s/ Dwight H. Williams, Jr.

United States Bankruptcy Judge

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