Filed: September 18, 2008

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 06-2114

(1:06-cv-00041-GBL; 05-BK-01207-RGM)

In Re: ROBERTA SPENCE,

Debtor.

-----------------------

ROBERTA SPENCE,

Plaintiff - Appellant,

v.

EDUCATIONAL CREDIT MANAGEMENT CORPORATION,

Defendant - Appellee.

O R D E R

Upon motion of Educational Credit Management Corporation for

publication of the court’s opinion,

IT IS ORDERED that the motion to publish is granted.

The court amends its opinion filed July 30, 2008, as follows:

On the cover sheet, section 1 -- the status is changed from

“UNPUBLISHED” to “PUBLISHED.”

On the cover sheet, section 6 -- the status line is changed to

read “Affirmed by published opinion.”
-2-

On page 2 – the reference to the use of unpublished opinions

as precedent is deleted.

For the Court - By Direction

 /s/ Patricia S. Connor 

 Clerk
PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: ROBERTA SPENCE, 

Debtor.

ROBERTA SPENCE,

Plaintiff-Appellant,  No. 06-2114

v.

EDUCATIONAL CREDIT MANAGEMENT

CORPORATION,

Defendant-Appellee. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Gerald Bruce Lee, District Judge.

(1:06-cv-00041-GBL; 05-BK-01207-RGM)

Argued: March 20, 2008

Decided: July 30, 2008

Before TRAXLER, Circuit Judge,

HAMILTON, Senior Circuit Judge, and

David R. HANSEN, Senior Circuit Judge

of the United States Court of Appeals

for the Eighth Circuit, sitting by designation.

Affirmed by published opinion. Senior Judge Hansen wrote

the opinion, in which Judge Traxler and Senior Judge Hamilton joined. 
COUNSEL

ARGUED: K. Cameron Currie, WAKE FOREST UNIVERSITY, School of Law, Winston-Salem, North Carolina, for

Appellant. Troy A. Gunderman, EDUCATIONAL CREDIT

MANAGEMENT CORPORATION, St. Paul, Minnesota, for

Appellee. ON BRIEF: John J. Korzen, Jessica M. Golden,

WAKE FOREST UNIVERSITY, School of Law, Appellate

Advocacy Clinic, Winston-Salem, North Carolina, for Appellant. Rand L. Gelber, Vienna, Virginia, for Appellee.

OPINION

HANSEN, Senior Circuit Judge: 

Roberta Spence appeals the judgment of the district court,

which reversed the bankruptcy court’s decision to discharge

her federally guaranteed student loan debt to the Educational

Credit Management Corporation (ECMC). The district court

concluded that Ms. Spence has not demonstrated that repayment "would impose an undue hardship" within the meaning

of the statute. 11 U.S.C. § 523(a)(8) (2000). We affirm the

judgment of the district court. 

I.

Roberta Spence was born in July 1941. For over thirteen

years she was employed by the Internal Revenue Service

(IRS), and she ran her own business for a time. In January

1983, she enrolled in Cloud County Community College,

where she studied computer science and began to incur student loan debt to pay for her education. She subsequently

attended Wichita State University, where she earned a general

studies bachelor’s degree in December 1986 and a master of

arts degree in sociology in July 1989. Unable to secure relevant employment in her chosen field, Spence entered into a

2 IN RE: SPENCE
Ph.D. program at American University in Washington, D.C.

She completed her course work for the Ph.D. but did not complete her dissertation, and she was no longer a student as of

2000. 

For short intervals, Ms. Spence worked for the American

University’s social science research laboratory, the Department of Housing and Urban Development, and the American

Association of Retired People. She also worked some temporary clerical positions and was unemployed for a period of

time. She finally obtained full-time employment with

E*Trade in August 2005, where she now works as a mail services specialist earning approximately $26,000 annually. She

also receives social security retirement benefits of $267 per

month. 

Ms. Spence estimates her total net income at $1676 per

month, after deductions that include life insurance and contributions to a 401K plan, and she estimates her expenses at

$1798 per month. (J.A. at 34.) Her rent is $905 per month and

other expenses include food, delinquent taxes, medication to

treat high blood pressure and diabetes, laundry, and entertainment. She has not sought other employment or updated her

resume since obtaining full-time employment with E*Trade.

She testified that she is not actively seeking other employment. 

Ms. Spence currently owes ECMC approximately $161,000

in the form of federally guaranteed student loan debt. She

sought and received loan deferments and forbearances

through December 31, 2004. Although she paid off the Perkins Loans that she received while attending Cloud County

Community College and made partial payments on Perkins

Loans that she received while attending Wichita State, Ms.

Spence has not made a single payment on the 31 different

loans currently held by ECMC.

Ms. Spence filed a petition for relief under Chapter 7 of the

Bankruptcy Code on December 31, 2004. She sought to have

IN RE: SPENCE 3
her student loan debt discharged, claiming that requiring

repayment would impose an undue hardship on her. Applying

the Brunner test as adopted by the Fourth Circuit in Educational Credit Mgmt. Corp. v. Frushour (In re Frushour), 433

F.3d 393, 400 (4th Cir. 2005)(adopting the three-part undue

hardship test of Brunner v. N.Y. State Higher Educ. Servs.

Corp., 831 F.2d 395, 396 (2d Cir. 1987)), the bankruptcy

court concluded (1) that Ms. Spence cannot currently maintain a minimal standard of living if forced to repay her loans,

(2) that additional circumstances exist indicating that her situation is likely to persist for a significant portion of the repayment period, and (3) that Ms. Spence made a good faith effort

to repay the loans. The bankruptcy court therefore discharged

all of her student loan debt. 

ECMC appealed to the district court, which reversed the

bankruptcy court’s decision to discharge the debt for undue

hardship. Specifically, the district court concluded that the

bankruptcy court erred in concluding that Ms. Spence had met

the second and third Brunner factors. The district court found

that Ms. Spence articulated no "additional circumstances"

beyond her age and current financial distress that would prevent her from repaying her loans, and that she had not shown

good faith efforts to repay her student loans.

Ms. Spence sought rehearing in the district court, see Fed.

R. Bankr. P. 8015, arguing in part that the district court’s

undue hardship analysis was contrary to the facts presented

and the law applicable to this case. The district court denied

rehearing, and Ms. Spence appeals. 

II.

ECMC first asserts that we lack jurisdiction to consider the

merits of the underlying judgment reversing the bankruptcy

court’s order because Spence’s notice of appeal designated

only the district court’s order denying her motion for rehearing and not the final order denying a discharge for undue

4 IN RE: SPENCE
hardship. Rule 3 of the Federal Rules of Appellate Procedure

requires a notice of appeal to "designate the judgment, order,

or part thereof being appealed." Fed. R. App. P. 3(c)(1)(B).

We liberally construe Rule 3(c)’s requirements concerning the

sufficiency of the notice of appeal "to avoid technical impediments to appellate review." Bogart v. Chapell, 396 F.3d 548,

555 (4th Cir. 2005) (internal marks omitted). The "designation of a postjudgment motion in the notice of appeal is adequate to support a review of the final judgment when the

intent to do so is clear." Brown v. French, 147 F.3d 307, 311

(4th Cir.), cert. denied, 525 U.S. 1025 (1998). Such an intent

is clear where the appellant addresses "the merits of a particular issue in her opening brief," thereby providing the appellees

"notice of the issue and the opportunity to fully brief it."

Bogart, 396 F.3d at 555. Cf. Foman v. Davis, 371 U.S. 178,

181 (1962) (concluding intent to appeal the merits was manifest where both parties briefed and argued the merits of the

judgment and the opposing party was not misled or prejudiced). Compliance is found where "‘the litigant’s action is

the functional equivalent of what the rule requires.’" Smith v.

Barry, 502 U.S. 244, 248 (1992) (quoting Torres v. Oakland

Scavenger Co., 487 U.S. 312, 317 (1988)). 

The circumstances in this case indicate that the functional

equivalent of what the rule requires has been satisfied. Ms.

Spence filed a timely pro se notice of appeal designating the

district court’s ruling on her rehearing motion, and a major

issue in that motion was the merits of the district court’s

undue hardship analysis. Both parties briefed the merits of

this issue on rehearing before the district court, so the merits

would be integral to a review of the denial of rehearing. Additionally, Ms. Spence’s opening brief in this appeal likewise

included the undue hardship issue, and ECMC fully briefed it

on appeal as well. Although ECMC clearly challenged up

front Spence’s failure to specifically designate the final judgment in the notice of appeal, the issue was not unanticipated,

there is no claim that ECMC was misled by the contents of

the notice of appeal, and it has suffered no prejudice. We conIN RE: SPENCE 5
clude that we have jurisdiction to address the merits of the

underlying judgment. 

III.

Government-guaranteed student loan debt is ordinarily not

dischargeable in bankruptcy unless the debtor and the debtor’s

dependents would suffer an undue hardship if repayment is

required. 11 U.S.C. § 523(a)(8). The issue in this case is

whether requiring Ms. Spence to repay her student loans

would impose an undue hardship. The debtor seeking a discharge bears the burden of proving that she meets all three

factors of the undue hardship test by a preponderance of the

evidence. Educ. Credit Mgmt. Corp. v. Mosko (In re Mosko),

515 F.3d 319, 324 (4th Cir. 2008); Frushour, 433 F.3d at 400.

We review the bankruptcy court’s decision directly, applying

a de novo standard of review to the legal conclusion that the

debtor met the undue hardship standard and reviewing the

underlying findings of fact for clear error. Frushour, 433 F.3d

at 398-99. The underlying findings of fact are not challenged

in this appeal; consequently, we review only the bankruptcy

court’s legal conclusion that Ms. Spence satisfied the factors

of the undue hardship test. 

In order to prove an undue hardship within the meaning of

the statute, the Brunner test requires Ms. Spence to demonstrate: (1) that she cannot maintain a minimal standard of living if forced to repay the loans given her current income and

expenses; (2) that additional circumstances indicate that this

situation is likely to persist throughout the student loan repayment period; and (3) that she has made good faith efforts to

repay the loans. See id. at 400. That Ms. Spence satisfied the

first Brunner factor is not questioned. ECMC challenges the

bankruptcy court’s conclusion that she met the second and

third factors. 

The second factor, whether "additional circumstances"

exist to indicate that the debtor’s situation is likely to persist

6 IN RE: SPENCE
for a significant portion of the loan repayment period, "is the

heart of the Brunner test." Frushour, 433 F.3d at 401. This

factor "most clearly reflects the congressional imperative that

the debtor’s hardship must be more than the normal hardship

that accompanies any bankruptcy." Id. We have characterized

this as "a demanding requirement" necessitating "a certainty

of hopelessness" which confirms that the debtor will not be

able to repay the loans. Id. (internal marks omitted). 

We conclude that Ms. Spence has not met this exacting

standard. She is now in her late 60s and has a low-paying job,

but she is by all accounts a reliable, diligent worker with a

master’s degree along with completed Ph.D. course work. Her

grades were excellent, and her education is not so outdated

that higher-paying alternatives would be unreachable. Ms.

Spence suffers from diabetes and high blood pressure, but neither these ailments nor any other age-related health problems

affect her ability to work full-time. She has had difficulty

obtaining a higher paying position, but she has not actively

sought other employment or even updated her resume since

obtaining the full-time job at E*trade. We have said that

"[h]aving a low-paying job . . . does not in itself provide

undue hardship, especially where the debtor is satisfied with

the job, has not actively sought higher-paying employment,

and has earned a larger income in previous jobs." Id. We are

not unsympathetic to the disadvantages of her current circumstances, but the facts point to no "additional circumstances,"

outside of the normal hardships faced by bankruptcy petitioners, that would render her situation hopeless. 

The third factor, which requires a showing that the debtor

has made a good faith effort to repay the loans, "looks to the

debtor’s efforts to obtain employment, maximize income, and

minimize expenses." Id. at 402 (internal marks omitted).

Additionally, "the debtor’s hardship must be a result of factors over which she had no control," and "her effort to seek

out loan consolidation options that make the debt less onerous

IN RE: SPENCE 7
is an[other] important component of the good-faith inquiry."

Id.; see also Mosko, 515 F.3d at 324. 

As already noted, the facts do not show that Ms. Spence

has made a good faith effort to maximize her income. She is

highly educated yet appears to be satisfied working as a mail

services specialist for E*Trade. She has not made efforts to

continue pursuing a more lucrative line of work and admitted

she was not presently pursuing other work at all. Also, Ms.

Spence did not fully explore the possibility of loan consolidation programs that offer reduced payments based upon the

debtor’s limited income. She made efforts to obtain available

deferments and forebearances, but after they expired, she

immediately filed for bankruptcy and has not made one payment on any of the loans held by ECMC. Obtaining the deferment of student loans is not sufficient to demonstrate a good

faith effort to repay them when the deferment is followed by

not one payment or any effort to work out a reasonable payment schedule. See id. at 326-27; see also Brunner, 831 F.2d

at 397 (finding no good faith effort where debtor filed for discharge within one month of the date the first payment came

due on her loans). Furthermore, her choice to repay some of

the Perkins Loans does not demonstrate a good faith effort to

repay the student loans held by ECMC. 

We have noted before that "[d]ebtors receive valuable benefits from congressionally authorized loans, [and] Congress in

turn requires loan recipients to repay them in all but the most

dire circumstances." Frushour, 433 F.3d at 399. "This heightened standard protects the integrity of the student-loan program . . ." and "prevent[s] debtors from easily discharging

their debts at the expense of the taxpayers who made possible

their educations." Id. at 400. We conclude that Ms. Spence

has not met her burden to demonstrate either additional circumstances rendering her situation hopeless or that she has

made a good faith effort to repay her loans. 

8 IN RE: SPENCE
IV.

Accordingly, the bankruptcy court erred in concluding that

Ms. Spence demonstrated an undue hardship that entitled her

to the discharge of her student loans. We affirm the judgment

of the district court and hold that Ms. Spence’s student loans

held by ECMC are not dischargeable. 

AFFIRMED

IN RE: SPENCE 9