F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

M I C H A E L E R

I C H E D L U N D , Plaintiff-Appellant
,

v

.

T H E E D U C A T I O N

A L R E S O U R

C E S I N S T I T U T E I

N C .; and P E

N N S Y L V A N I A H I G H E R E D U C A T I O N A S S I S T A N C E A G E N C Y , Defendants-Appellees

. N o. 12-35258

D.C. No. 6:11-cv-6281- AA

OPI NI ON

A ppeal from the United States District Court for the District of Oreg on Ann L . Aiken, Chief District J u dg e, Presiding

Arg ued and Submitted March 11, 2013—Pasaden a , California

F iled May

22, 2013

B e fore: Harry

Preg erson, A. W a llace Tashima, and Milan D. Smith, J r., Circuit J udg es.

Opinion by

J u dg e TashimaH E D L U N D V

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SUMMARY *

Bankruptcy

Reversing the district court’s judg ment , t h e panel h eld that the bankruptcy court d i d not err in g ranting a partial discharg e of the debtor’s student loans under 11 U

. S

. C

. § 523(a)(8).

The panel held that the district cour t erred by reviewing the bankruptcy court’s g ood faith finding de novo, rather than for clear e rror. The panel concluded t h a t t h e g ood faith findi ng was not clearly erroneous, and remanded the case to the district c ourt with inst r u c t ions to reinstate the partial discharg e ordered by

the bankruptcy

court.

COUNSEL

Yonatan B raud e (arg

ued) and Derek F oran, Morrison & F oerster L L P, San F rancisco, California; and Natalie Scott, The Scott L aw Group, Eug ene, Oreg on, fo r P l a intiffAppellant.

Daniel Steinberg (a r gu e d ) and Sanford L andress, Greene & Markley , P.C., Portland, Oreg on, for Defendant-Appellee.

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.H E D L U N D V

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OP INION

TASHI MA, Circuit J udg e:

Michael Hedlu n d is a law school g raduate who asserts that he cannot pay off h i s s t u dent loans. After filing for bankruptcy
, h e soug ht a d ischarg e of his student loans under 11 U.S.C. § 523(a)(8). The bankruptcy court g ranted a partial discharg e, b ut, on appeal, the d istri c t c ourt reinstated the student loan debt in f

u l l as non-discharg eable. Specifically
, the dis t r i c t court ruled that Hedlund had not acted in g ood fait h
, w hich is o ne o f three p rerequisites for relief under § 523(a)(8).

W e hold that the d i s t ri ct court erred in reviewing the bankruptcy court’s g ood faith finding de novo

. I n a § 523(a)(8) proceeding
, the g o o d f aith finding should be reviewed for clear error. Under the p r o p e r standard o f review, we affirm the bankruptcy court’s ruling

.

I.

Hedlund was thirty -three y e a rs old at t h e time of the bankruptcy

proceeding s. He had earned a bachelor’s deg r ee in business administration from the University of Oreg on a nd

a law deg ree from W illamette L aw School. Hedlund financed his education with Stafford loans, which were held in part b y The Education Resources I nstitute (“TERI ”) and in p art b y t h e Pennsy lvania Hig her Education Assistance Ag e ncy (“PHEAA”).

After law school, Hedlund took a bar preparation course for the Oreg on bar and then took the bar ex amination in J uly 1997. W hile awaiting the results, he worked as an intern forH E D L U N D V

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t h e Klamath County District Attorney

. He failed the ex a m , re-sat in F ebruary 1998, and f a i l e d ag ain. He lost his job at the District Attorney ’s o ffice for failure to p ass the bar ex am

on his second try

. He then obtained f ull-time employ

ment a s

a J uvenile Counselor with the Klam at h County J u venile Departm e n t. W h ile employ ed full time a s a J u venile Counselor, he enrolled in another b ar p reparation course a nd took two months off to study

. E n route to the ex am, however, when he stopped for coffee, he inadvertently locked his key s in his car. He missed the ex a m

. H e d lund married in 2000 and became a father in 2001.

Hedlund’s lo a n s went into repay ment in J anuary 1999, 1 while he was wo r k i n g as an intern at the District Attorney ’s office. He owed PHEAA over $85,00 0
, o n which the monthly pay

ments ex ceeded $ 8 0 0

. B ecause he was making only $10 per hour, he soug ht and obtained various hardship forbearances. After the ex tensions ended and in a n effort to reduce his monthly pay

ments, Hedlund applied to consolidate his loans. W hen he later called to verify t h e status of his consolidation application, he was told that it had never been

r eceived and that, because he was now in default
, h e w a s inelig ible for consolidation. Hedl u n d then researched his potential elig ibility for the I ncome Contin ge n t Repay ment Plan (“I CRP”). 2 Ba sed on his o nline research – and on the

1 Stu den t lo an recip ien ts ty p i c a l l y a r e n o t req u ired to b eg in m ak in g p ay m en ts to p ay

b ack th eir lo an s u n til so m e p o in t af ter th e b o rro w er h as

co m pleted h is o r h er ed u catio n al p ro g ram

.

2 U n d er th e ICRP
, th e d eb to r p ay s th e lesser o f : (1 ) p ay m en ts b ased on

a 1 2

- y ear am o rtizat i o n d eriv ed b y ap p licatio n o f an an n u ally ad j u s ted
p ercen t ag e of th e d eb to r’ s ad j u sted g ro ss in co m e; o r (2 ) 2 0 % o f th eH E D L U N D V

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loan p rovider’s repr e s e ntation that he was inelig ible for consolidation due to the default – Hedlund concluded that he would not qualify

for the I CRP.

I n Se ptember 1999, Hedlund received a $5,000 inheritance. H e paid $95 4

. 7 2 t o PHEAA, and the rest went to other creditors. Still u nable to make his monthly
pay ments, Hedlund tried to neg otiate a less onerous pay ment schedule. According to Hedlund, PHEA A o ffered two options: ( 1 ) pay $10,000 up front, then $1,300 a month for
ten months, and then an adjusted monthly pay ment; or (2) pay

a lump sum of appr o x i mately $80,000. Neither option was feasible for He d l u n d
, but he did offer to make a $5,000
pay ment – w hich he would h ave borrowed from his parents

– in e x chang e for a more lenient pay ment schedule. PHEAA declined Hedlund’s offer. 3

PHEAA beg an g arnishing Hedlund’s wag es in J anuary 2002 a t the rate of a bo u t $ 2 50 per month. These
g arnishmen ts continued uncontested until May 2003 a nd amounted to $4,272.52. At that time, Hedlund’s other student loan creditor, TERI
, obtained a c ollection action judg ment

a g ainst Hedlund and g arnished $1,100 directly f r o m Hedlund’s bank account. On May 7, 2003, Hedlund f iled a Chapter 7 bankruptcy

petition.

On J une 16, 2003, Hedlund comme n c ed an adversary proceeding ag ainst PHE AA a nd TERI
, seeking partial

d eb to r’ s an n

u ally ad j u sted d iscretio n ary i n co m e, d ef in ed as ad j u sted g ro ss in co m e less ap p licab le f ed eral p o v erty g u id elin e s

. S ee 3 4 C .F.R. § 6 8 5 .2 0 9

.

3 T h e reco rd is u n clear o n w h en p recisely th ese n eg o tiatio n s to o k p lace.H E D L U N D V

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dischar ge of his loans under 11 U.S.C. § 523(a)(8). He settled with TERI before trial, a g re e i ng to pay down $17,718.15 at a rate o f $ 5 0 p er month. I n other pretrial
neg otiations, PHEAA offered t hree potential r epay

ment plans “if the L oans [ were] determined not to be discharg eable

. . . . ” All three options called for pay ment of the entire loan balance

over the course of 30 y ear s

. The f irst option called for monthly pay

ments of approx imately $420; the remaining options beg an with monthly p ay ments of $307 and rose to $430 a nd $440 respectively

. Hedlund did not, an d h a s not, pursued any of these options.

After trial, the bankruptcy c ourt g ranted a par tial discharg e of all but $30,000 of the PHEAA d ebt. On appeal, the B ankruptcy Appella t e P anel (“B A P”) reversed a nd reinstated the debt in its e n t i r e t y

. Hedlund appealed to this Court, and we vacated the B AP de cision and remanded for further proceeding s. W e held that the bankruptcy court failed
to consider all of the e vidence a nd properly to apply the three factors from Brunner v. New Y ork Higher Education S

ervices Corp.
, 831 F

. 2d 395 (2d Cir. 1987). 4 See Hedlund v. Penn. Higher Educ. A s sistance Agency ( In re Hedlund)
, 368 F . App’x 819 (9th Cir. 2010).

On remand to the bankruptcy court, the parties ag reed to proc e ed o n the orig inal 2003 record and the case was rearg ued and submitted. Afte r the case was submitted for decision, however, the orig inall y assig ned judg e , J udg e Albert Radcliffe, passed a w ay , and the case was reassig ned to J udg e Philip B randt. J udg e B r andt ruled in Hedlund’s favor and d ischarg ed all b ut $32,080 of his d e b t to PHEAA.

4 W e ad o p ted th e Bru n n er test i n Un ited S tu d en t Aid Fu n d

s, In c. v. Pen a ( In re Pen a) , 1 5 5 F.3 d 1 1 0 8, 1 1 1 1

– 1 2 (9 th Cir. 1 9 9 8 ).H E D L U N D V

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Apply ing the three-factor Brunner test, J udg e B randt found that: (1) Hedlund c ould not h ave ma i n t a i ned a minimal standar d o f living
, if required to r epay the full loans; (2) “additional circumstances” indicated that Hedlund’s inability
to repay his loans would persist into the future; and (3) Hedlund had made g o od faith efforts to repay his loans.

PHEAA appealed and the district court reversed, finding

no error under the first two p rong s, b u t c o n cluding that the bankrupt c y court’s g ood faith ruling was erroneous. According ly
, the district court reinstated the e ntirety o f the PHEAA loan. Hedlund timely appeals. W e have jurisdiction under 28 U.S.C. § 158(d), and we reverse the district court.

II.

A.

S t u d e n t l o a n o b l i g a t i o n s a r e p r e s u m p t i v e l y nondischarg eable in bankruptcy absent a showing of “undue hardship.” 11 U.S.C. § 523(a)(8). T o d e t e r m i n e if a debtor has shown undue hardship, we follow the three-part test from Brunner

. See In re P ena , 155 F .3d at 1 1 1 1

– 1 2

. Under Brunner
,

the debtor must pr o v e that: (1) he cannot maintain, based on current inc o m e a nd

ex p en ses, a “minimal” standard of living for himself a nd his depend ents if required to repay the loans; (2) a dditional circumstances

ex ist indicating that this state of affairs is likely to persist for a sig nificant portion of the

r e p ay ment period; and (3) the debtor h a s made g ood faith efforts to repay the loans.H E D L U N D V

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Educ. Credit Mgmt. Corp. v. Mason ( In re Mason)
, 464 F .3d 878, 882 (9th Cir. 20 0 6). “[ T] h e b u rden of proving undue hardship is on the debtor, and the debtor must prove all three elements before discharg e ca n be g ranted.” Rifino v

. United States ( In re Rifino)
, 245 F .3d 1083, 1087–88 (9th Cir. 2001).

This appeal concerns only the g o od faith p rong o f Brunner . The bankruptcy court ruled in Hedlund’s favor on all three prong s, and the dis t r i c t court f ound error only with respect to t h e l a s t prong , g ood f aith. 5 B efore addressing the
proper standard of review, we beg in with a summary of the bankruptcy

court and district court ruling s.

B.

“Good faith is measured by the debtor’s efforts to obtain employ ment, max imiz e income, and minimiz e ex penses.” Penn. Higher Educ. Assistance Agency v. B i r rane ( In re Birrane) , 287 B .R. 490, 499 (B .A.P. 9th Cir. 2002) (internal quotation marks and citation omitted). “ C o u rts w ill also consider a debtor’s effort

– o r lack thereof – to neg o tiate a repay ment plan, althoug h a history of making or not making
pay ment s i s , b y itself, not dispositive.” In re Mason
, 464 F .3d at 8 8 4 (internal quotation marks and citations

5 P HEA A m ak es a p assin g arg u m en t t h at th e b an k

ru p tcy co u rt’ s ru lin g s

o n th e f irst t w o Bru n n er p ro n g s w ere erro n eo u s. W ith o u t m a ki n g an y

co g en t arg u m en t, P HEA A sim ply ask s u s t o rely o n th e B A P ’ s 2 0 0 4

rev ersal o f t

h e b an k ru ptcy co u rt d u rin g th e f

irst ro u n d o f litig atio n , w

h ich

rev iew ed an en tirely d i f

f eren t b an k

ru p tcy co u rt o rd er an d w as v acated b y th is Co u r t ’s r e m an d o rd er. A cco rd in g ly
, PHEA A h as w aiv ed th ese arg u m en ts. S

ee L e e r v

. M

u rp h y , 84 4 F.2 d 6 28
, 6 3 4 (9 th Cir. 19 8 8) (“ Issu es raised in a b rief w h ich are n ot s u

p p orted b y arg u m en t are d eem ed ab an d o n ed .”).H E D L U N D V

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omitted). The bankruptcy court considered each of these factors.

1. Efforts to obtain employment, maximize income, and minimize expenses.

The ban k ru p tcy court found that H edlund w as “wellplaced for his s k i lls” and that there were no hig her pay ing jobs a vailable to him in the Klamath F alls area. I t also noted that Hedlund had unsuccessfully applied for two hig h erpay ing jobs. F inally
, the c ourt cited ex pert testimony showing that, althoug h hig her pay ing jobs mig ht be available outside of Klamath F a lls, the potential incre a se in salary would be offset by

increased living ex penses.

Noting that Hedlund had tried three times to take the bar

ex a m, the bankruptcy court also f ound that Hedlund’s failure to pass was not “ within his control.” I n any event, the court found no evidence sug g esting that Hedlund could make a hig her wag e as a licensed attorney

. The c o u r t a l so rejected P HEAA’s arg ument that Hedlund should seek an additio n al part time job, a lthoug h the court did find that his wife could b e e x pected to work three day s per w eek rather than o n e. Thus, the court found that Hedlund had sufficiently

max imiz ed his income.

The bankruptcy court then reviewed Hedlund’s personal budg et, and concluded that certain ex penses ex ceeded what

was reasonably

necessary

to maintain a minimal standard o f living

. 6 Specifically
, the court found that Hedlund’s clothing
,

6 T h e co u rt’ s an aly sis o f Hed lu n d ’ s ex p en ses relied in p art on its f in d in g s u n d er th e f

irst Bru nn er pro n g

. T h ere, th e co u rt h ad ru l ed th at th e

m aj o rity of Hed lu n d ’ s ex pen ses w ere reaso n ab ly n ecessary , an d th u s th atH E D L U N D V

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recreation ( including cable and interne t )
, a n d “ m i s c e llaneous” budg ets (including childcare a nd haircuts) c ould all be reduced. B y contrast, the court found no fault with Hedlund’s budg et f or two cell pho n es ( gi v en that the Hedlunds had a

sma l l c h ild) and for the lease of a second car (g iven that the Hedlund’s other car was o lder and unreliable). Taken tog ether, the court found that the failure full y t o m i nimiz e

ex p enses did not “tip the balance a w ay from a g ood faith finding ” because Hedlund and his family “have alway s lived frug ally .”

2. Efforts to negotiate a repayment p lan; history of payments; and timing of the attempt to discharge the loan.

Under these factors, the co u rt noted with approval that Hedlund had waited four y ears before fili ng for bankruptcy and that he had, in that time, made a vo l u n t a r y pay ment o f
approx imately $950. The court also cre d ited Hedlund for “endur[ ing ] ,” without challeng e , six teen and a h alf months o f
wag e g arnishments.

W ith reg a

rd to alternative r epay

ment plans, the court found that Hedlund had made a dequate e fforts to pursue one. The court noted that Hedlund had soug ht to c onsolidate loans, but t h a t the lender had lost h is application. The court also took into account Hedlund’s offer to make an imme diate
pay ment of $ 5 ,000 in ex chang e for more lenient repay ment terms.

h e co u ld n o t m ain tain a m in i m al stan d ard of liv in g if req u ired to rep ay th e lo an s in f u ll.H E D L U N D V

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The court did not fault H edlund for failing to apply for the I CRP. H edlund h a d investig ated the I CRP option online but concluded that he was not elig ible because he was in default. Mo r e o v er, PHEAA h ad conceded that pay ments under the I CRP would have been more per month than the three o ptions PHEAA had offered just before trial. F inally
, the c ourt f ound that H edlund was ju s tified in rejecting the three repay ment options PHEAA had offered. The court stressed that the three options all had monthly pay ments over $300, which was more than Hedlund could afford wit h o ut undue h ardship. 7 The
court also noted that each option called for a thirty -y ear plan, and thu s h e l d that Hedlund was justified in refusing to oblig ate himself “into his mid-60s” when his children would likely be seeking

to attend colleg e.

Considering all of this e v idence tog ether, the bankruptcy
court f ound that Hedlund’s situation was not “self-inflicted” and that he had carried his burden of showing g ood faith.

C.

The district court reviewed the g ood faith ruling d e novo and reversed. Althoug h the district court ag reed that Hedlund had made sufficient efforts to obtain employ ment, it concluded that Hedlund “ha[ d] not u s e d his best efforts to

max imiz e his income or minimiz e his ex penses.” Hedlund v

. Educ. Res. Inst., Inc.
, 468 B

. R. 901, 914 (D. Or. 2012). That conclusion was apparently based o n t he court’s finding s under prong one t h a t s o me of Hedlund’s ex penses were “immoderate.” Id

. at 910. T h e court then found Hedlund’s

7 $ 3 0 0 p er m o n th ex ceed ed th e ban k ru ptcy co u rt’ s f

in d in g , on

th e f irst Bru n n er p ro n g , o f h o w m u ch in co m e H ed lu n d co u ld d e v o te to stu d en t lo an p ay m en ts.H E D L U N D V

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lack of effort in neg otiating a repay ment plan “even more

vex atious.” I

d

. a t 910, 915. I n that reg ard, the c ourt felt that Hedlund was “less than d ilig ent” in ex plori n g t h e I CRP option, and it viewed H e dlund’s $5,000 pay ment offer a s unrealistic. Id. at 915. The c o u rt a lso faulted Hedlund for

r e j e cting the three pre-trial repay ment plans offered by PHEAA. Id

. F inally
, the c o u rt observed that Hedlund a nd his wife h ad chosen to live a s a sing le-income family
, “a li fe sty le that few today c an afford.” Id

. at 916. Thus, the district court reversed the b a n kruptcy court’s g o od faith finding

.

III.

A.

“B ecause this court is in as g ood a position as the district
court to review the finding s of the bankruptcy court, it independently reviews the bankruptcy court’s decision.” Ragsdale v. H

aller , 780 F .2d 794, 795 (9th Cir. 1986). As a threshold matter, we must resolve a d i s p ute over the proper standard of review o f the bankruptcy court rulin gs

. T h e district court r eviewed the g o od faith determination d e n ovo , but H edlund contends that it should have applied clear error review. W e ag ree with Hedlund.

Although we review “the bankruptcy court’s interpretation of the B ankruptcy Code de novo and its f actual finding s for clear error,” Miller v. Cardinale ( In re DeVille)
, 361 F .3d 5 3 9
, 547 (9th Cir. 2004) (internal quotation marks and citations omitted), we h a v e not e x pressly stated which

s t andard applies to the g ood faith prong o f Brunne r

. Nevertheless, w e have con s istently reviewed the g ood faith
prong for clear error. S ee I n r e Mason
, 464 F .3d at 885H E D L U N D V

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(“[ T] he bankruptcy court clearly erred in finding that Mason demonstrated g ood faith efforts to repay his loans.”); I n re Pena
, 1 5 5 F .3d at 1114 (“[ T] he bankruptcy court did not clearly err in finding that the Penas e x h i b i ted g ood faith in attempting to p ay back the stu d e n t l o a ns.”). 8 W e have also applied the deferential c lear error standard of review to g ood faith inquiries i n other setting s. See Figter Ltd. v. Teachers Ins. & Annuity A ssoc. of Am. ( In re F igter Ltd.)
, 1 1 8 F.3d 635, 638 ( 9th Cir. 1997) (collecting cases and n o ting that because g o o d f

a ith is “an essentially factual inquiry ” this Court has “in various contex ts, declared that [ it] will r eview
g ood f aith determinations f

or clear error” (internal quotation marks a nd citations omitted)). According ly
, we now confirm that a g ood faith finding under Brunner should be reviewed for clear error. 9

This directive does not preclude a reviewing court from correcting errors of law that may arise in the midst of a g ood faith analy sis. F or ex ample, in In re Bir r a n e t h e B AP h eld that “the bankruptcy court erred as a matter of law in finding that B irrane met the g ood faith prong .” 287 B .R. at 5 00. The

error in that case was one of law, reviewed de novo , because

8 A t least o n e o t

h er circu it h as ex p ressly ap plied clear erro r to th e § 5 2 3
g o o d f aith in qu iry

. S

ee Krieg er v. Ed

u c. Cred it Mg t. Co r

p

. , No

. 1 2

- 3 5 9 2
, 2 0 1 3 W L 1 4 42 3 0 5
, at * 2 (7 th Cir

. Ap r

. 1 0
, 2 0 1 3 ) (“ [T h e g o o d f aith ]
stan d ard co m

bin es a state o f m in d (a f

act) w ith a leg al ch aracterizatio n (a

m ix ed q u estio n o f law an d f act )

. F in d in g s o f f

act m u st stan d u n less clearly erro n eo u s, an d

. . . .m ix ed q u estio n s lik ew ise are treated as f actu al in n atu re.”).

9 W e also n o t e t h a t u n d e r o u r estab lish ed stan d ard o f rev iew of b an k ru p tcy co u rt ru lin g s, af

ter rev iew b y t

h e district co u rt o r b y th e B A P
, see Ra gsd

ale
, 7 8 0 F.2 d at 7 9 5
, th e d istrict co u rt’ s ru lin g o n th e g oo d f

aith issu e w ou ld n o t h av e b een en titled to an y d ef er e n ce, b u t w o u ld b e

rev iew ed “ in d ep en d en tly .”H E D L U N D V

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the b a nkruptcy court had failed to consider all factors relevant
to g ood faith. I nstead, it had f ound g ood faith based solely on the evidence o f v o l u n t ary p ay ments. Id

. at 4 9 9. Thus, al thoug h g ood faith is primarily a question of fact reviewed for clear e rror, it can encompass questions of law that must be reviewed de novo

. 1 0

W e now consider the g ood faith ruling in question.

B.

As an initial matter, the bankruptcy court properly a pplied all three Brunner prong s, and it considered the various f actors that are relevant to g ood f

aith. T h us, its r

uling withstands our de novo review o f t h e leg al questions involved. W hat remains are the bankruptcy court’s factual finding s. A s discussed below, those were not clearly erroneous. 1 1

10 S i m i l a rly
, clear erro r rev iew i s co n sisten t w ith o u r o bserv atio n th at “u n d u e h ard sh ip req u ires a d eterm in atio n o f th e l eg al ef f ect o f th e b an k ru p tcy co u rt’ s f

i n d in g s reg ard in g th e s t u d en t’ s circu m stan ces, a q u estio n o f law w

h ich w e rev i ew d

e n o vo .” In re Ma so n , 4 6 4 F .3 d at 8 8 1 (in t ern al q u o tatio n m ark s o m itted ). T h i s is sim p ly an o t h er w ay o f s tatin g th at w e rev i ew th e ap p licatio n o f Bru n n er d e n o vo , i.e.
, w

h eth er th e b an k ru p tcy co u rt pro p erly ap p lied th e th ree- p ro n g test. Fo r in s tan ce, if th e b an k ru p tcy co u rt h ad g ran ted a disch arg e b a s e d o n ly o n t h e f i rst tw o p ro n g s o f Bru n n er , w e w o u ld rev erse u n d er d e n o vo rev iew

.

11 Clear erro r ap p lies ev en th ou g h J u d g e Bran d t b ased h is f i n d in g s o n th e trial tran scrip t an d o th er d o cu m en tary ev i d en ce. S

ee An d erso n v. City o

f Bessemer C

ity, N.C.
, 4 7 0 U .S. 5 6 4
, 5 7 4 (1 9 8 5) (“ W h e r e t h ere are tw o p erm i ssib le v ie w s o f th e ev id en ce, th e f actf in d er’ s ch o ice b etw een th em

can n o t b e clearly erro n eo u s. T h is i s s o e v e n w h en th e [trial] co u rt’ s f in d in g s d o n o t rest on cred i b ility d eterm in atio n s, b u t are b ased in stead on p h y sical o r d o cu m en tary ev id en ce o r in f eren ces fr o m o th er f

acts.” (in t ern al citatio n s o m i tted )); s ee a l so Fed . R. Civ . P . 5 2 (a)(6 ).H E D L U N D V

. E D U C A T I O N

A L R E S O U R

C E S I N S T

. 15

There was considerabl e ev idence showing that Hedlund had max imiz ed h is inc o m e, and the court properly declined
to attribute Mrs. Hedlund’s underemploy ment to Hedlund’s b a d faith. Althoug h Hedlund had not fully minimiz e d h i s

ex p enses, the court permissibly interpreted the e x cess

ex p enses as marg inal. And althoug h we mig ht have viewed certain e x penses more skeptically

– such as the new car lease and the two cell phones – the court’s v iew of the e x p en s e s was not clearly

erroneous.

The r ecord reg a

r ding efforts to n eg otiate and to make voluntary p ay

ments is less favorable to Hedlun d

. A l thoug h he did submit a consolidation application, h is efforts thereafter were minimal. His offer to pay $5,000 in ex chang e for a more lenient plan was at best unrealistic, and his research into I CRP elig ibility coul d h a v e been more searching

. Hedlund has a lso decline d to pursue the three revised r epay

ment plans that PHEAA offered just before trial. F inally , in the four y ears prior to bankruptcy , Hedlund made only a sing le voluntary

pay ment of approx imately

$950. 1 2

Althoug h this evidence could be interpreted to support a finding o f lack of g ood f aith, it was n ot s o s t r ong as to demand such a finding

. I ndeed, the e videnc e o f Hedlund’s
g ood faith is mor e substantial than in the two primary cases relied u pon by PHEAA. I n I

n re Birrane
, the debtor h ad “failed to take an y steps towards r eneg otiating a repay ment schedule under the I CRP prog ram. ” 2 8 7 B .R. at 500. I n contrast, Hedlund at least made an effort to res e a r c h his

1 2 W e n eed n o t determ in e if
, as th e b an k

ru p t cy co u rt ru led
, u n co n tested
g arn ish m en ts d em o n strate g o o d f aith

. Ev en if t

h is v iew o f t

h e e v id en ce

w as im p ro per, th e co u rt’ s in terp retatio n o f th e reco rd as a w

h o le w as n o t clearly erro n eo u s.H E D L U N D V

. E D U C A T I O N

A L R E S O U R

C E S I N S T

. 16

elig ibility

. Moreover, unlike Hedlun d
, t h e d e btor in In re Birrane had maintained only part-time employ ment and thus had failed to max imiz e her income. Id . at 499–500.

I n In re Mason , the d e b tor had failed to pursue the I CRP option “with d ilig ence.” 464 F .3d at 885. Althoug h the same mig ht be said of H edlund’s efforts, other factors present in I n

re Mason a

re not p r e s e n t here. Specifically
, Mason h ad not pursued full time employ ment and had only taken and failed the bar ex am once. I n contrast, Hedlu n d h a s max imiz ed employ ment, made three attempts at the b ar ex a m and, in any event, submitted evidence that a law license would n ot materially improve his financial situation. Also weig hing in Hedlund’s favor is the f

act that he waited four y ears from the beg inning o f his repay

ment oblig ations, during which period he was subject to w ag e g ar n i s h m ents, before filing for bankruptcy

. S

ee Brunner
, 831 F .2d at 397 (finding bad faith in part because debtor filed for discharg e one month after first
pay ment date).

I n sum, even t h o u g h some mig ht disag ree with the bankruptcy court’s g ood faith finding
, it w a s n ot clearly

erroneous. The court relied o n s u b s tantial evidence in the record, and its factual inferences were permissible.

IV.

The bankruptcy court’s g o od faith finding was not clearly
erroneous; we, therefore, r everse the district court’s contrary holding

. W e remand to the d istrict court with instructions to reinstate the partial discharg e ordered by the ban k r u p t cy court.

REVERSED and REMANDED w ith directions.