2001 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-3-2001

In Re: Brightful

Precedential or Non-Precedential:

Docket 00-1250

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Recommended Citation

"In Re: Brightful" (2001). 2001 Decisions. Paper 226.

http://digitalcommons.law.villanova.edu/thirdcircuit_2001/226
Filed October 3, 2001 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

NO. 00-1250 

IN RE: PATRICIA A. BRIGHTFUL 

PATRICIA A. BRIGHTFUL 

v. 

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE 

AGENCY; SALLIE MAE TRUST; FIRST UNION BANK 

CHRISTINE SHUBERT, ESQ., Chapter 7 Trustee; 

FREDERICK BAKER, ESQ., U.S. TRUSTEE, 

 Trustees 

Pennsylvania Higher Education Assistance 

Agency ("PHEAA"), 

 Appellant 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civil No. 99-cv-06348) 

District Judge: Honorable Marvin Katz 

Argued April 17, 2001 

Before: ALITO, RENDELL and FUENTES, Circuit Ju dges, 

(Filed: October 3, 2001) 
 Jason L. Swartley, Esq. 

 Byron F. Walker, Esq. [ARGUED] 

 Pennsylvania Higher Education 

 Assistance Agency 

 1200 North 7th Street 

 Harrisburg, PA 17102 

 Counsel for Appellant 

 Pennsylvania Higher Education 

 Assistance Agency 

 Henry J. Sommer, Esq. [ARGUED] 

 Miller, Frank & Miller 

 21 South 12th Street 

 640 PSFS Building 

 Philadelphia, PA 19107 

 Counsel for Appellee 

 Patricia A. Brightful 

OPINION OF THE COURT 

RENDELL, Circuit Judge. 

The Pennsylvania Higher Education Assistance Agency

("PHEAA") appeals the District Court's affirmance of the 

Bankruptcy Court's decision to discharge Patricia 

Brightful's student loan obligations. The issue presented by 

this appeal is whether Brightful's student loans burden her 

with an "undue hardship" that would render them 

dischargeable pursuant to 11 U.S.C. S 523(a)(8). Applying 

the three-pronged test we adopted in In re: Faish, 72 F.3d 

298 (3d Cir. 1995), we hold that Brightful's student loans 

do not constitute an "undue hardship," and will reverse the 

District Court. 

I. Facts and Procedural Background 

This case arises out of an adversary proceeding filed by 

Brightful, seeking a determination that her student loans 

are dischargeable under 11 U.S.C. S 523(a)(8) because 

repayment of the loans would cause "undue hardship." On 

November 8, 1999, after a hearing on the merits, the 

Bankruptcy Court ruled that the loans were dischargeable. 

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PHEAA appealed, and the District Court affirmed the

Bankruptcy Court's decision on February 28, 2000, based 

solely upon the Bankruptcy Court's Order and 

Memorandum. PHEAA now appeals the District Court's 

order.1 

The Bankruptcy Court made the following findings of

fact. At the time of the Bankruptcy Court proceedings, 

Brightful was a 46-year-old single mother of a 14-year-old 

daughter. Due to their eviction from their former residence 

on July 19, 1999, Brightful and her daughter reside with 

Brightful's sister in a crowded three-bedroom home. The 

Bankruptcy Court characterized Brightful's living situation 

as "sub-marginal by any standards." 

The Bankruptcy Court noted that Brightful has no 

degree, but has completed the equivalent of two years of 

college education. Most recently, she attended the New 

School for Social Research in New York City, but she has 

also attended the Community College of Philadelphia, 

Temple University, and Pierce Junior College. During the 

late 1980's and early 1990's, Brightful was employed fulltime as a legal secretary at the Dechert law firm in 

Philadelphia. Since the early 1990's, she has worked parttime at Dechert. At the time of the hearing, Brightful was 

paid $18 per hour for her work at Dechert, but was only 

working nine to 30 hours per month, and estimated that 

she would earn approximately $8,500 in 1999. During

1998, she earned $20,000 at Dechert. Additionally, the 

Bankruptcy Court remarked that Brightful had filed sexual 

discrimination and sexual harassment charges against 

Dechert in 1998. 

The Bankruptcy Court described Brightful as "very 

intelligent" and "physically healthy." However, the court 

also determined that Brightful had "glaring psychiatric 

problems" and that she was "emotionally unstable." The 

court noted that Brightful had made two suicide attempts, 

one in the last year. The court concluded that it was 

_________________________________________________________________ 

1. We have jurisdiction over this appeal pursuant to 28 U.S.C. S 158(d). 

The Bankruptcy Court had jurisdiction over the original adversary 

proceeding pursuant to 28 U.S.C. S 157(b), and the District Court had 

jurisdiction over the first appeal pursuant to 28 U.S.C. S 158(a). 

 3 
unlikely that Brightful would ever attain her college degree, 

and that Brightful lacked useful vocational training. Finally, 

the court determined that Brightful's pursuit of sexual 

discrimination charges against Dechert had both scarred 

her future prospects with that firm and accounted for the 

sharp reduction in her income in 1999 as compared to 

1998. 

II. Standard of Review 

The trier of fact in this case was the Bankruptcy Court, 

not the District Court. Therefore "[w]e are in as good a 

position as the district court to review the findings of the 

bankruptcy court, so we review the bankruptcy court's 

findings by the standards the district court should employ, 

to determine whether the district court erred in its review." 

Fegeley v. United States, 118 F.3d 979, 982 (3d Cir. 1997) 

(quoting Universal Minerals, Inc. v. C.A. Hughes & Co., 669 

F.2d 98, 102 (3d Cir. 1981)). We must accept the 

Bankruptcy Court's findings of fact unless they are clearly 

erroneous, but we exercise plenary review over legal issues. 

Id. We therefore exercise plenary review over the 

Bankruptcy Court's application of our three-pronged Faish 

test to the facts of this case. See Brunner v. New York State 

Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987) 

(noting that whether debtor suffers "undue hardship" under 

11 U.S.C. S 523(a)(8) is a conclusion regarding the legal 

effect of the bankruptcy court's factual findings).

III. Discussion 

The Bankruptcy Code provision at issue provides that: 

 (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 -- . . . 

 (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 excepting such 

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 debt from discharge under this paragraph will impose 

 an undue hardship on the debtor and the debtor's 

 dependents; 

11 U.S.C. S 523(a)(8) (emphasis added). 

In In re: Faish, 72 F.3d 298 (3d Cir. 1995), we analyzed 

this statutory section in detail.2 We noted the difficulty in 

applying the "undue hardship" exception of 11 U.S.C. 

S 523(a)(8), because the drafters of the Bankruptcy Code 

did not define "undue hardship." Id. at 302. As a result, we 

had to look to the legislative purpose behind 11 U.S.C. 

S 523(a)(8) for guidance. Ultimately, we adopted the Second 

Circuit's three-pronged test for determining "undue

hardship," found in Brunner v. New York State Higher 

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

because the Brunner test was the "most logical and 

workable of the established tests" for assessing"undue 

hardship." Faish, 72 F.3d at 306. 

Under this test, "undue hardship" requires a three-part 

showing: (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 for student loans; and (3) that the 

debtor has made good faith efforts to repay the loans. Id. at 

304-05. The debtor has the burden of establishing each 

element of this test by a preponderance of the evidence. Id. 

at 306; see also Grogan v. Garner, 498 U.S. 279, 291 (1991) 

(holding that "the standard of proof for the dischargeability 

exceptions in 11 U.S.C. S 523(a) is the ordinary 

preponderance-of-the-evidence standard"). If one of the 

elements of the test is not proven, the inquiry must end 

there, and the student loans cannot be discharged. Faish, 

72 F.3d at 306. Moreover, this test must be strictly 

construed: equitable concerns or other extraneous factors 

_________________________________________________________________ 

2. At the time that Faish was decided, the "undue hardship" exception 

appeared in 11 U.S.C. S 523(a)(8)(B). In 1998, Congress amended the 

statute by incorporating this exception into 11 U.S.C. S 523(a)(8). This 

change is irrelevant to our analysis, however, because the language of 

the two versions is exactly the same. 

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not contemplated by the test may not be imported into the 

analysis of "under hardship." Id. 

Applying this test to Brightful's situation, we must first 

determine whether she has met her burden of 

demonstrating that she cannot maintain, based on current 

income and expenses, a minimal standard of living for 

herself and her dependent daughter if forced to repay the 

loans. We note that this inquiry is made difficult by the fact 

that the Bankruptcy Court made no factual findings 

regarding Brightful's expenses. Brightful did submit some 

information and testified briefly regarding her expenses, but 

PHEAA contends that much of this information is 

inaccurate, incomplete and undocumented. 

For its part, the Bankruptcy Court appeared merely to 

assume that Brightful could not maintain a "minimal" 

standard of living because her 1999 income, which the 

court estimated at $8,500, was so low. While this might be 

a reasonable assumption, it is also true that Brightful 

earned significantly more money in 1998 ($20,000), is not 

on public assistance, and apparently has no significant 

housing expenses because she is living in her sister's home. 

Furthermore, in its November 8, 1999 order, the 

Bankruptcy Court did not even mention the amount of

Brightful's loan payments. Our own examination of the 

record, however, reveals that as of October 20, 1999, 

Brightful's student loan indebtedness totaled $52,261.70 in 

principal and interest, which corresponds to a loan

payment of $626 per month over the ten year life of the loans.3 

Despite the dearth of information regarding Brightful's 

expenses, we nonetheless will assume, for the sake of 

argument, that at the time of the Bankruptcy Court 

proceedings, Brightful could not make her student loan 

payments and still maintain a minimal standard of living 

for herself and her daughter. As detailed below, we think it 

clear that Brightful has failed to meet her burden under the 

second prong of the Faish test, and thus we will not 

_________________________________________________________________ 

3. PHEAA points out, however, that Brightful is eligible to consolidate 

her 

student loans for a period of twenty-five years, which apparently would 

reduce her monthly payments to $355.57. 

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concern ourselves with the deficient state of the record 

regarding the first prong. 

Under the second element of the test, Brightful must 

prove that additional circumstances exist indicating that 

she cannot maintain a minimal standard of living for a 

significant portion of the repayment period if forced to 

repay her loans. This is a demanding requirement. As we 

indicated in Faish, it is not enough for Brightful to 

demonstrate that she is currently in financial straits; 

rather, she must prove "a total incapacity . . . in the future 

to pay [her] debts for reasons not within[her] control." Id. 

at 307 (quoting In re: Brunner, 46 B.R. 752, 758 (S.D.N.Y. 

1985)). In other words, "dischargeability of student loans 

should be based upon the certainty of hopelessness, not 

simply a present inability to fulfill financial commitment." 

Brunner, 46 B.R. at 755 (quoting In re: Briscoe, 16 B.R. 

128, 131 (Bankr. S.D.N.Y. 1981)); see also In re: Ballard, 60 

B.R. 673, 675 (Bankr. W.D. Va. 1986) (explaining that "[a] 

finding of undue hardship is reserved for the exceptional 

case and requires the presence of unique or extraordinary 

circumstances which would render it unlikely that the 

debtor ever would be able to honor his obligations"). 

As noted earlier, the Bankruptcy Court concluded that 

Brightful most likely would never attain her college degree, 

lacks useful vocational training, suffers glaring psychiatric 

problems, is emotionally unstable, and that her pursuit of 

sexual discrimination charges against Dechert had both 

scarred her future prospects with that firm and accounted 

for the sharp reduction in her income in 1999 as compared 

to 1998. On the basis of these factual findings, the court 

believed that there was a "substantial likelihood that 

[Brightful's] sub-marginal economic circumstances will 

persist for many years, probably for the rest of her life," and 

that therefore she had satisfied the second prong of the 

Faish test. 

At the outset, we think the Bankruptcy Court's finding 

that Brightful lacks useful vocational training is clearly 

erroneous. It is undisputed that Brightful has worked for 

over a decade in both a full-time and part-time capacity as 

a legal secretary at Dechert. As part of this employment, 

she is trained to operate office equipment and computer 

 7 
software. Brightful has never suggested that she lacked the 

skills to perform the duties of a legal secretary-- indeed, 

such a suggestion would contradict the fact that she 

currently holds that position, albeit in a part-time capacity. 

Thus, we reject the Bankruptcy Court's unsupported 

conclusion that Brightful lacks useful vocational training. 

Similarly, we reject the Bankruptcy Court's conclusions 

that Brightful's pursuit of sexual discrimination charges 

against Dechert had both scarred her future prospects with 

that firm and accounted for the sharp reduction in her 

income in 1999 as compared to 1998. During the 

Bankruptcy Court proceedings, neither the circumstances 

surrounding Brightful's sexual discrimination charges nor 

the consequences flowing from these charges were 

adequately explored. Rather, as the Bankruptcy Court 

noted in the beginning of its opinion, the circumstances 

surrounding the charges were "unexplained." There is 

simply no basis in the record for the Bankruptcy Court's 

conclusion that Brightful was the victim of retaliation for 

bringing charges against Dechert. Indeed, such a 

conclusion would seem to be contradicted by Brightful's 

continued employment at Dechert a higher rate of pay ($18 

per hour) than she received prior to filing her charges. In 

any event, the Bankruptcy Court's conclusions on this 

matter were purely speculative, and accordingly, we reject 

them.4 

_________________________________________________________________ 

4. Furthermore, even were we to accept the Bankruptcy Court's 

conclusions, they would not support a finding of"additional 

circumstances" indicating that Brightful cannot maintain a minimal 

standard of living for a significant portion of her loan repayment period. 

If Brightful's employment prospects at Dechert were foreclosed, it would 

be her responsibility to diligently pursue employment elsewhere -- 

something that the record indicates she has not done, as evidenced by 

her failure to have a current resume and her inability to recall the 

names of temporary employment agencies that she allegedly contacted in 

the past. See, e.g., In re: Greco, 251 B.R. 670, 677 (Bankr. E.D. Pa. 

2000) (holding that the debtor had failed to meet her burden under the 

second prong of Faish because "[t]he testimony offered by the Debtor at 

trial does not reveal a diligent effort on her part to secure a stable, 

salaried job," and "the Debtor has not demonstrated any efforts to seek 

employment in another field"). 

 8 
The Bankruptcy Court gave great weight to Brightful's 

alleged emotional and psychiatric infirmities, concluding 

from Brightful's testimony that she was emotionally

unstable and that she had "glaring" psychiatric problems. 

We think these findings have some support in the record, 

especially considering that Brightful has apparently 

attempted suicide twice in her life. PHEAA argues, however, 

that such findings require expert testimony, and cannot be 

made simply on the basis of the debtor's testimony. We 

disagree. It was appropriate for the Bankruptcy Court, as 

the trier of fact, to assess Brightful's testimony and draw 

reasonable conclusions regarding her mental and emotional 

state. E.g., In re: Cline, 248 B.R. 347, 350 (B.A.P. 8th Cir. 

2000) (explaining that "[t]here is no reason to view the trial 

court's findings [regarding the debtor's emotional state] as 

unreliable merely because no expert evidence was 

introduced"). 

What is missing from the Bankruptcy Court's analysis, 

however, is any discussion of the nature of Brightful's 

emotional and psychiatric problems, or how these problems 

prevent her from being gainfully employed. The Bankruptcy 

Court seems to have merely assumed that Brightful's

emotional and psychiatric problems would automatically 

preclude her from holding full-time employment. Yet

Brightful's testimony, while perhaps supporting the general 

conclusion that she has emotional and psychiatric 

problems, is notable for its lack of detail. It contains no 

explanation of the precise nature of her problems, and no 

explanation of how her condition would impair her ability to 

work as a legal secretary. Nor does she claim that her 

problems have greatly intensified in 1999, and are therefore 

responsible for the sharp reduction in her hours in 1999 as 

compared to 1998. Rather, it is clear from her testimony 

that her mental and emotional difficulties have existed 

throughout her adult life. 

Without any further explanation of Brightful's mental and 

emotional condition (or at least some indication that this 

condition will deteriorate in the future), there is simply no 

record basis for the conclusion that Brightful's emotional 

and psychiatric problems constitute the sort of"additional 

circumstances" contemplated by Faish's second prong. 

 9 
While we do not belittle Brightful's problems, nevertheless 

Brightful has the burden of demonstrating how these

problems impair her ability to work. In our view, she has 

not even attempted to meet this burden. At the very least, 

such an attempt would include an explanation as to how 

she was able to work full-time as a legal secretary in the 

past (and indeed was able to work a significant number of 

hours in 1998), and yet cannot do so in the future. E.g., In 

re: Wardlow, 167 B.R. 148, 152 (Bankr. W.D. Mo. 1993) 

(holding that the debtor had failed to satisfy the second 

prong of the Brunner test because the debtor"offered no 

proof of the severity of [her] medical condition. [She] is 

sufficiently healthy to perform her job, and offered no 

indication she would be unable to perform in the future."). 

In sum, Brightful has failed to demonstrate the type of 

exceptional circumstances that are necessary in order to 

meet her burden under the second prong of Faish . She is 

intelligent, physically healthy, currently employed, 

possesses useful skills as a legal secretary, and has no 

extraordinary, non-discretionary expenses. While she does 

have one dependent, her daughter is now only two years 

from the age of majority, and therefore this legal 

dependency is nearly at end. Thus we readily conclude that 

Brightful has failed to satisfy her burden. E.g. , In re: 

Roberson, 999 F.2d 1132, 1137 (7th Cir. 1993) (explaining 

that the second prong of the test requires a showing of "the 

type of barrier that would lead us to believe [the debtor] will 

lack the ability to repay for several years," such as 

psychiatric problems preventing work, lack of usable job 

skills and severely limited education, or the necessity of 

fully supporting several dependents); Brunner , 831 F.2d at 

396-97 (holding that the debtor had failed to carry her 

burden under the second prong because, inter alia, "[s]he is 

not disabled, nor elderly," and "[n]o evidence was presented 

indicating a total foreclosure of job prospects in her area of 

training"); Brunner, 46 B.R. at 755 (noting that 

circumstances that would satisfy the second prong"have 

been found most frequently as a result of illness . . . a lack 

of usable job skills . . . the existence of a large number of 

dependents . . . or a combination of these"). Because 

Brightful has failed to meet her burden under the second 

prong of the Faish test, we hold that her student loans are 

 10 
not dischargeable, and there is no need for us to address 

the third prong of the test. Faish, 72 F.3d at 306.

We realize that our result in this case might appear 

harsh, especially given the fact that Brightful does not have 

her college degree and is unlikely ever to attain it, as the 

Bankruptcy Court found. Therefore, unlike many student 

loan debtors, she cannot anticipate significantly increased 

earnings in the future that would flow from her educational 

investment. Instead, she must for the foreseeable future 

rely upon her existing legal secretarial skills to fund her 

expenses and educational debt. This situation is 

unfortunate, but it does not excuse Brightful from meeting 

her student loan obligations. As we observed in Faish: 

 [F]ederal student loan programs were not designed to 

 turn the government into an insurer of educational 

 value. Students who benefit from guaranteed loan 

 programs normally would not be eligible to receive any 

 financing or only financing at a higher rate of interest. 

 Since the decision of whether or not to borrow for a 

 college education lies with the individual, it is the 

 student, not the taxpayers, that must accept the 

 consequences of the decision to borrow. 

Id. at 305 (internal quotations marks and citations

omitted). 

In other words, when a student loan borrower accepts 

money from the government, she strikes a bargain. And 

"[l]ike all bargains, it entails risk. It is for each student 

individually to decide whether the risks of future hardship 

outweigh the potential benefits of a deferred-payment 

education." Brunner, 46 B.R. at 756. Here, Brightful struck 

her bargain, she took her risk, and unfortunately, things 

did not work out as planned. Brightful's hardship is real, 

but under the Faish test, it is not "undue," and therefore 

we cannot discharge her obligation to repay her student 

loans. 

In light of the foregoing, we will REVERSE the February 

28, 2000 order of the District Court. 

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A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 12