FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: LORNA KAYE NYS, 

Debtor,

No. 04-16007

EDUCATIONAL CREDIT MANAGEMENT BAP No.

CORPORATION,  NC-03-01438-

Appellant, MaMcP

v. OPINION

LORNA KAYE NYS,

Appellee. 

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Perris, McManus, and Marlar, Bankruptcy Judges,

Presiding

Argued and Submitted

February 15, 2006—San Francisco, California

Filed April 26, 2006

Before: Stephen Reinhardt, Richard A. Paez, and

Richard C. Tallman, Circuit Judges.

Opinion by Judge Tallman

4763
COUNSEL

Miriam Hiser, San Francisco, California; Curtis P. Zaun, Educational Credit Management Corporation, St. Paul, Minnesota, for the appellant. 

Christopher G. Metzger, Eureka, California, for the appellee.

OPINION

TALLMAN, Circuit Judge: 

Debtor-Appellee Lorna Kaye Nys (“Nys”) filed an adversary complaint in bankruptcy court to have her student loans

discharged under 11 U.S.C. § 523(a)(8). The trial court found

from the evidence that Nys’s current income is “not nearly

enough to pay off her student loans,” and that it “is the most

she can reasonably be expected to earn in the foreseeable

4766 IN RE: NYS
future.” The bankruptcy court nonetheless ruled against Nys,

concluding that “undue hardship” requires the showing of an

“exceptional circumstance” beyond the mere inability to pay.

Nys appealed to the Bankruptcy Appellate Panel (“BAP”).

In a published decision, Nys v. Educ. Credit Mgmt. Corp. (In

re Nys), 308 B.R. 436 (B.A.P. 9th Cir. 2004), the BAP

reversed and remanded, directing the bankruptcy court to

reevaluate Nys’s claim using the correct legal standard. The

BAP reasoned that the three-prong test we adopted in United

Student Aid Funds, Inc. v. Pena (In re Pena), 155 F.3d 1108

(9th Cir. 1998),1 for determining whether the repayment of

student loans would impose an “undue hardship” on the

debtor or her dependents requires the debtor to show “additional circumstances” that prove that her inability to pay in the

present will likely persist for a significant portion of the

loan’s repayment period. Nys, 308 B.R. at 444. We affirm the

BAP. “Undue hardship” does not require an exceptional circumstance beyond the inability to pay now and for a substantial portion of the loan’s repayment period. 

I

Nys filed a Chapter 7 bankruptcy petition in the Northern

District of California on June 12, 2002.2 Shortly thereafter,

she filed an adversary complaint against Educational Credit

1

In Pena, we adopted the three-prong test set forth by the Second Circuit in Brunner v. New York State Higher Education Services Corp., 831

F.2d 395 (2d Cir. 1987) (per curiam). Under this test, the debtor must

show: “(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.” Id. at 396. Hereinafter, we will refer

to this test as the Brunner test. 

2We extract most of the facts from the BAP’s published opinion, confirmed by our own independent review of the record. 

IN RE: NYS 4767
Management Corporation (“ECMC”), the holder of her federally guaranteed student loans, to have those loans fully discharged under 11 U.S.C. § 523(a)(8).3

Between 1988 and 1992, Nys took out thirteen separate student loans to finance an Associate of Arts Degree in Science

and Drafting Technology from the College of the Redwoods

and a Bachelor of Arts Degree from Humboldt State University. In 1996, Nys began working at Humboldt State University as a drafting technician. She is employed as a Drafter II,

the highest drafter position available at Humboldt State. In

2002, Nys’s net gross income was $40,244. Because she pays

$140 per month to her retirement plan, her 2002 W-2 shows

an adjusted gross income of $36,981.74. The bankruptcy

judge found that this income was about as high as one could

reasonably expect in Humboldt County given her profession

and educational background. The evidence also showed that

Nys lived in a modest home in Fortuna, California, which was

in need of extensive repairs. At the time of trial, Nys was 51

years old. She plans to retire at age 65, and at that time her

income will drop considerably. 

Nys borrowed approximately $30,000 through student

loans. At the time of trial, she owed approximately $85,000

in accumulated principal and interest. Nys’s net monthly

income was $2,299.33. She claimed $2,295.05 in monthly

expenses. 

Because she was granted deferments, Nys made no payments on her student loans until August 2001, when she

received a wage garnishment notice from ECMC’s

3

In relevant part, § 523(a)(8) provides that a Chapter 7 discharge does

not discharge an individual debtor from any debt “unless excepting such

debt from discharge . . . would impose an undue hardship on the debtor

and the debtor’s dependents, 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.” 11 U.S.C. § 523(a)(8) (emphasis added). 

4768 IN RE: NYS
predecessor-in-interest. To avoid garnishment, Nys paid $130

per month on her student loans. She made those payments

until May 2002, when ECMC notified her that her monthly

payments would increase to $917.56. 

At that time, Nys contacted the William D. Ford Loan Program (“Ford”), see 34 C.F.R. § 685.100, in an attempt to

establish an affordable payment plan. The parties dispute

what type of payment plan Ford offered Nys. Nys claims that

Ford informed her that her monthly payments would still be

between $800 and $900, and that she would need to pay an

initial assessment fee of almost $14,000. ECMC argues that

Nys is eligible for an Income Contingency Repayment Plan4

and that under this program her monthly payment would be

between $389 and $453.5

During the trial, Nys argued that she is still unable to make

payments on her student loans, and that because of additional

circumstances, her inability to pay will continue into the foreseeable future. Her “additional circumstances” were that (1)

she is 51 years old (14 years from legal retirement age), (2)

she has “maxed out” in her career and her income is as high

as it is ever going to be, (3) her house is in need of substantial

repairs, and (4) she commutes daily at some distance in an old

automobile with high mileage that will soon need to be

replaced. 

The bankruptcy court ruled for ECMC, finding that Nys

had not proved “undue hardship.” Although it concluded that

“Nys is clearly incapable of repaying more than a portion of

4Nys claimed that she was never offered an Income Contingency

Repayment Plan. The trial court did not resolve this discrepancy given its

disposition of the case. 

5At the time of the trial, Nys was still able to claim one of her children

as a dependent. As a result, ECMC argued that her payments under the

Ford Program would have been $389 per month. Now, if she can no longer claim any dependents, ECMC acknowledges that her monthly payment

would be approximately $453. 

IN RE: NYS 4769
her student loans and this situation will almost certainly persist for the foreseeable future,” it found no undue hardship

because “[Nys] ha[d] demonstrated no additional circumstances beyond the mere inability to pay.” The bankruptcy

court rejected Nys’s argument that “undue hardship exists any

time the debtor cannot afford to pay the loans now or in the

foreseeable future.” It found that “[e]xceptional circumstances

must be shown to meet the second prong of the Brunner test.”

The BAP reversed the bankruptcy court because it concluded that the bankruptcy court had applied the wrong legal

standard when addressing the second prong of the Brunner

test. As the BAP characterized the test, “[a]dditional circumstances are any circumstances, beyond the mere current

inability to pay, that show that the inability to pay is likely to

persist for a significant portion of the repayment period.” Nys,

308 B.R. at 444. Because the bankruptcy court required the

additional circumstances to be exceptional, the BAP reversed

and remanded for an application of the correct “additional circumstances” test. 

II

The bankruptcy court had jurisdiction under 28 U.S.C.

§ 157(b), the BAP had jurisdiction under 28 U.S.C. § 158(b),

and we have jurisdiction under 28 U.S.C. § 158(d). We independently review the bankruptcy court’s decision. Rifino v.

United States (In re Rifino), 245 F.3d 1083, 1086 (9th Cir.

2001). The bankruptcy court’s findings of fact are reviewed

for clear error and its application of the legal standard is

reviewed de novo. Id. at 1086-87.

III

[1] The issue we must decide is whether “undue hardship”

requires an additional or exceptional circumstance beyond an

impervious financial situation that will continue to impede the

debtor’s ability to make payments on her student loans and

4770 IN RE: NYS
maintain a minimal standard of living. Section 523(a)(8) provides that a student loan is not dischargeable “unless excepting such debt from discharge . . . would impose an undue

hardship on the debtor and the debtor’s dependents.” 11

U.S.C. § 523(a)(8). “Undue hardship” is not defined in the

Bankruptcy Code; however, we and a majority of the other

circuits have expressly adopted the Brunner test. See supra

note 1. 

When it adopted the Brunner test, the Second Circuit

explicitly incorporated the reasoning of the district court in

toto. Brunner, 831 F.2d at 396. The district court had

throughly analyzed the limited legislative history pertaining to

the “undue hardship” requirement, Brunner v. N.Y. State

Higher Educ. Servs. Corp. (In re Brunner), 46 B.R. 752, 753-

55 (Bankr. S.D.N.Y. 1985), and therefore, because the legislative history was influential in the development of the Brunner

test, we will discuss it again here. 

Congress provided little in the way of express legislative

intent specifically addressing the “undue hardship” requirement when it passed the statute. Id. at 753. Nonetheless, the

phrase “undue hardship” was lifted verbatim from a bill proposed by the Commission on the Bankruptcy Laws of the

United States (“Commission”), and with no clear indication to

the contrary, we may impute the Commission’s intent to Congress. Id. at 754; see also McClendon v. Cal-Wood Door (In

re Wadsorth Bldg. Components, Inc.), 711 F.2d 122, 124 (9th

Cir. 1983) (looking to the Commission’s report to interpret

congressional intent). The Commission recognized that there

was a high incidence of students filing for bankruptcy after

finishing their education. Brunner, 46 B.R. at 754. 

This “rising incidence” contravened the general policy that “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

IN RE: NYS 4771
unable to earn sufficient income to maintain himself

and his dependents and to repay the educational

debt.” 

Id. (quoting Report of the Comm’n on the Bankr. Laws of the

United States, H.R. Doc. No. 93-137, at 140 n.15 (1973)

[hereinafter Report of the Comm’n] (alteration in original)).

By requiring a showing of undue hardship, 

the Commission envisioned a determination of

whether the amount and reliability of income and

other wealth which the debtor could reasonably be

expected to receive in the future could maintain the

debtor and his or her dependents at a minimal standard of living as well as pay off the student loans. 

Id. (citing Report of the Comm’n, H.R. Doc. No. 93-137, at

140-41 n.17). 

Therefore, Congress sought to prohibit a “garden-variety

debtor” from discharging student loans, especially when that

“garden-variety debtor” will presumably use her loan-funded

education to substantially increase her income in the near

future. See Rifino, 245 F.3d at 1087 (“ ‘Congress viewed

garden-variety hardship as [an] insufficient excuse for a discharge of student loans . . . .’ ” (quoting Pena, 155 F.3d at

1111) (second alteration in original)). What separates a

“garden-variety debtor” from a debtor who can show “undue

hardship” is the realistic possibility that a “garden-variety

debtor” could improve her financial situation in the future.

With increased financial stability, a debtor can make payments on her student loans and maintain a minimal standard

of living. In comparison, forcing debtors who cannot reasonably be expected to increase their future income to make payments on their student loans when it causes them to fall below

a minimal standard of living constitutes an “undue hardship.”

4772 IN RE: NYS
[2] Consequently, in an effort to comply with congressional

intent and to provide some guidance for the lower courts that

are primarily responsible for administering the “undue hardship” standard, the Second Circuit adopted the three-prong

test formulated by the district court. See Brunner, 831 F.3d at

396. The dispositive issue in this appeal is what is meant by

the phrase “additional circumstances” as it is used in the second prong. ECMC argues that the “[m]ere inability to repay

one’s student loans in the future has never been the test for

determining undue hardship.” ECMC contends that “Pena and

Brunner require a debtor to show not just future inability to

repay, but that ‘additional circumstances’ preclude future

repayment.” In other words, ECMC contends that “undue

hardship” requires the debtor to show (1) the inability to pay

now and in the foreseeable future and (2) some additional or

exceptional circumstance beyond the mere inability to repay.

ECMC misinterprets our case law and the purpose of the “additional circumstances” language in the Brunner test.6

[3] To be eligible for a discharge of student loans, the

debtor must prove that her present inability to pay will likely

6Under the test as proposed by ECMC, any decision within the debtor’s

control could not qualify as an “additional circumstance.” Therefore, a

person who has chosen to go into a certain field and who, despite her best

efforts, has topped out in her career with no possibility of future advancement cannot obtain a discharge of her student loans. ECMC argues that the

debtor must either uproot her family and move, or switch careers to try to

obtain a higher paying job. Because a college education is expensive no

matter what field a student chooses, we cannot say that a debtor who, in

good faith, chooses a certain field but ultimately cannot increase her

income to a point that allows her to repay her student loans, is foreclosed

from seeking a discharge. Furthermore, courts have recognized that a lack

of useable job skills may constitute “additional circumstances.” Pa.

Higher Educ. Assistance Agency v. Birrane (In re Birrane), 287 B.R. 490,

497 (B.A.P. 9th Cir. 2002). Clearly, a student makes a choice as to which

skills she will pursue during her education. We cannot fault a debtor for

making such a choice when, later on, it turns out that despite her best

efforts her skills are simply not sufficient to allow her to earn adequate

sums to repay accumulated principal and interest. 

IN RE: NYS 4773
persist throughout a substantial portion of the loan’s repayment period. See Pena, 155 F.3d at 1114 (finding that the

debtors satisfied the Brunner test in part because “their unfortunate financial situation was likely to continue for a substantial portion of the repayment period”). The focus of this

inquiry is the debtor’s financial situation. 

[4] We recognize that courts have found it difficult to predict future income. Consequently, courts have required debtors to present “additional circumstances” to prove that their

present financial situation will persist well into the future, preventing them from making payments throughout a substantial

portion of the loans’ repayment period. See, e.g., Brunner,

831 F.2d at 396 (“Predicting future income is . . . problematic.

Requiring evidence not only of current inability to pay but

also of additional, exceptional circumstances, strongly suggestive of continuing inability to repay over an extended

period of time, more reliably guarantees that the hardship

presented is ‘undue.’ ”). These “additional circumstances” are

meant to be objective factors that courts can consider when

trying to predict the debtor’s future income; the debtor does

not have a separate burden to prove “additional circumstances,” beyond the inability to pay presently or in the future,

which would justify the complete or partial discharge of her

student loans. 

In support of its contrary position, ECMC cites the Sixth

Circuit’s decision in Cheesman v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d 356 (6th Cir. 1994).

In Cheesman, although the Sixth Circuit discussed Brunner,

it did not expressly adopt Brunner’s three-prong test. Id. at

359. Rather, it found that the debtor’s “loans were dischargeable under any undue hardship test the [trial] court may have

used.” Id. In reaching that conclusion, the Sixth Circuit stated

that “there is no indication that the Cheesmans’ financial situation will improve in the foreseeable future.” Id. at 360. 

ECMC argues that Cheesman presents an easier test

because the debtor is only required to show a future inability

4774 IN RE: NYS
to pay, and that we explicitly rejected such a standard when

we adopted the Brunner test in Pena. Therefore, ECMC contends that future inability to pay has never been the standard

for proving “undue hardship” in the Ninth Circuit. We disagree. 

[5] In Pena, although we recognized the semantical difference in language employed between Cheesman and Brunner,

we concluded that “[i]t does not appear that the Sixth Circuit

in Cheesman was proclaiming a test distinct from Brunner.”

155 F.3d at 1112. Accordingly, we reject ECMC’s argument,

but will set forth here the manner in which Pena and Brunner

apply to a court’s effort to predict a debtor’s future income.

We do not presume that an individual’s present inability to

make loan payments will continue indefinitely. Rather, we

hold that the burden is on the debtor to provide the court with

additional circumstances, i.e., “circumstances, beyond the

mere current inability to pay, that show that the inability to

pay is likely to persist for a significant portion of the repayment period. The circumstances need be ‘exceptional’ only in

the sense that they demonstrate insurmountable barriers to the

debtors’ financial recovery and ability to pay.” Nys, 308 B.R.

at 444.7 However, although the trial court should look to “additional circumstances” to make this finding, the determinative question is whether the debtor’s inability to pay will,

given all we know about the salient features of her existence,

persist throughout a substantial portion of the loan’s repayment period. 

7By “additional circumstances” or “exceptional circumstances” we

mean only that the debtor must present something more than her current

financial situation. In other words, she cannot rely on the fact that if she

made payments now on her student loans, she would not be able to maintain a minimal standard of living. Rather, she must present the court with

circumstances that she cannot reasonably change. To prove “undue hardship,” the circumstances must indicate that the debtor cannot reasonably

be expected to increase her income and make payments for a substantial

portion of the loan’s repayment period. 

IN RE: NYS 4775
Under this standard, the debtor cannot purposely choose to

live a lifestyle that prevents her from repaying her student

loans. Thus, the debtor cannot have a reasonable opportunity

to improve her financial situation, yet choose not to do so. See

Rifino, 245 F.3d at 1089 (stating the bankruptcy court’s factual finding that the debtor’s financial situation was not likely

to improve was clearly erroneous because, after she gained

experience, the debtor would have opportunities to advance to

higher paying positions within her profession). At the same

time, we cannot fault the debtor for having made reasonable

choices that now inhibit her ability to substantially increase

her income in the future. See Brunner, 46 B.R. at 754 (relying

on the Commission’s report and its belief that the “undue

hardship” test looks at what the “debtor could reasonably be

expected to receive in the future”). 

[6] We agree with the BAP that neither Brunner nor Pena

imposes a requirement that additional circumstances be “exceptional” in the sense that the debtor must prove a “serious

illness, psychiatric problems, disability of a depend[e]nt, or

something which makes the debtor’s circumstances more

compelling than that of an ordinary person in debt.” Nys, 308

B.R. at 444 (internal quotation marks omitted). Undue hardship requires only a showing that the debtor will not be able

to maintain a minimal standard of living now and in the future

if forced to repay her student loans. We will presume that the

debtor’s income will increase to a point where she can make

payments and maintain a minimal standard of living; however, the debtor may rebut that presumption with “additional

circumstances” indicating that her income cannot reasonably

be expected to increase and that her inability to make payments will likely persist throughout a substantial portion of

the loan’s repayment period. 

Bankruptcy courts may look to the unexhaustive list of “additional circumstances” provided by the BAP in its published

decision. See Nys, 308 B.R. at 446-47. The factors a court

may consider include, but are not limited to: 

4776 IN RE: NYS
[(1)] Serious mental or physical disability of the

debtor or the debtor’s dependents which prevents

employment or advancement; [(2)] The debtor’s

obligations to care for dependents; [(3)] Lack of, or

severely limited education; [(4)] Poor quality of education; [(5)] Lack of usable or marketable job skills;

[(6)] Underemployment; [(7)] Maximized income

potential in the chosen educational field, and no

other more lucrative job skills; [(8)] Limited number

of years remaining in [the debtor’s] work life to

allow payment of the loan; [(9)] Age or other factors

that prevent retraining or relocation as a means for

payment of the loan; [(10)] Lack of assets, whether

or not exempt, which could be used to pay the loan;

[(11)] Potentially increasing expenses that outweigh

any potential appreciation in the value of the debtor’s assets and/or likely increases in the debtor’s

income; [(12)] Lack of better financial options elsewhere. 

Id. (citations and footnotes omitted). 

IV

[7] The bankruptcy court erred in requiring Nys to show

exceptional circumstances beyond the inability to pay in the

present and a likely inability to pay in the future. We affirm

the BAP’s decision to reverse and remand the case back to the

bankruptcy court to allow it to apply the correct legal standard. The bankruptcy court should consider whether Nys has

shown that her inability to pay will likely persist throughout

a substantial portion of her loans’ repayment period. We

express no opinion as to whether Nys has established entitlement to a partial or complete discharge. The bankruptcy court

must determine the merits of her claim by applying the correct

legal standard and all three Brunner prongs to the factual record.8

8

It may be that Nys is entitled to only a partial discharge due to the

amount of the debt and the unlikelihood that her income will increase subIN RE: NYS 4777
On remand, the bankruptcy court must also determine

whether Nys has made a good faith effort to repay her student

loans, since all three prongs of the Brunner test must be met

before a court can make a finding of undue hardship. See

Rifino, 245 F.3d at 1087-88. This determination will require

the bankruptcy court to consider the evidence regarding the

Ford program, and whether Nys, in good faith, considered

consolidation options. See Alderete v. Educ. Credit Mgmt.

Corp. (In re Alderete), 412 F.3d 1200, 1206 (10th Cir. 2005)

(agreeing that “[although] participation in a repayment program is not required to satisfy the good-faith prong” it is considered “an important indicator of good faith” (internal

quotation marks omitted)). 

The decision of the Bankruptcy Appellate Panel is

AFFIRMED.

stantially between now and her retirement. Nys conceded that she has the

ability to pay a portion of the debt. Therefore, on remand, the bankruptcy

court should consider whether Nys is entitled to only a partial discharge.

See Saxman v. Educ. Credit Mgmt. Corp. (In re Saxman), 325 F.3d 1168,

1175 (9th Cir. 2003) (holding that before a bankruptcy court can use its

equitable powers under 11 U.S.C. § 105(a) to partially discharge a student

loan, it must find undue hardship). 

4778 IN RE: NYS