Opinion ID: 1227259
Heading Depth: 1
Heading Rank: 6

Heading: Prudential Ripeness Here

Text: Turning to the specific inquiry at hand, we note that Courts of Appeal are currently split as to whether student loan dischargeability determinations are ripe substantially in advance of plan completion. Most courts to address the issue do not specify which ripeness standard they are employing. The Ninth Circuit Bankruptcy Appellate Panel (BAP) has held that the issue of student loan dischargeability is ripe before the completion of plan payments. In re Taylor, 223 B.R. 747, 751-52 (9th Cir. BAP 1998), overruled on other grounds by Saxman, 325 F.3d at 1175. [17] Without explicitly applying the Abbott test or any particular ripeness standard, the BAP reasoned that the issue was ripe because Bankruptcy Rule 4007(b) expressly permits the filing of a § 523(a)(8) complaint at any time, and no statute or policy conflicts with the filing of such a complaint at any time. Taylor, 223 B.R. at 751-752. The Fourth Circuit has also held that undue hardship determinations may be ripe in advance of plan completion. In re Ekenasi, 325 F.3d 541, 547 (4th Cir.2003). The court expressly decline[d] to adopt a hard and fast rule which would preclude bankruptcy courts from ever entertaining a proceeding to discharge student loan obligations until at or near the time the debtor has completed payments under a confirmed Chapter 13 plan. A bankruptcy court in the Southern District of Ohio also took this approach. In re Strahm, 327 B.R. 319, 323-24 (Bankr.S.D.Ohio 2005). [18] Two Courts of Appeal disagree with Taylor. The Eighth Circuit, without applying any particular ripeness test, [19] held that, in undue hardship determinations, the factual question is whether there is undue hardship at the time of discharge, not whether there is undue hardship at the time that a § 523(a)(8) proceeding is commenced. In re Bender, 368 F.3d 846, 848 (8th Cir.2004). The court reasoned that student loan dischargeability proceedings should take place relatively close to [the date of discharge] so that the court can make its determination in light of the debtor's actual circumstances at the relevant time. Id. Similarly, the Fifth Circuit has held, in contrast to Taylor, that the undue hardship determination is not ripe until plan completion because dischargeability is not available until plan completion. [20] In re Rubarts, 896 F.2d 107, 109 (5th Cir.1990). [21] Applying Abbott, we agree with the Fourth Circuit and with the Ninth Circuit BAP that an undue hardship determination can be ripe substantially in advance of plan completion.
The purpose of the fitness test under Abbott is to delay consideration of the issue until the pertinent facts have been well-developed in cases where further factual development would aid the court's consideration. See, e.g., Nat'l Park Hospitality Ass'n v. Dep't of the Interior, 538 U.S. 803, 812, 123 S.Ct. 2026, 155 L.Ed.2d 1017 (2003) (further factual development would significantly advance our ability to deal with the legal issues presented so the matter determined not ripe for judicial review) (internal quotation marks omitted); Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 891, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) (regulation ordinarily not ripe for review until the scope of the controversy has been reduced to more manageable proportions, and its factual components fleshed out, by concrete action applying the regulation to the claimant's situation in a fashion that harms or threatens to harm him); Earth Island Inst. v. Ruthenbeck, 490 F.3d 687, 695 (9th Cir.2007) (issue not fit for review absent proper factual context to aid court's determination); Natural Res. Def. Council, Inc. v. EPA, 22 F.3d 1125, 1133 (D.C.Cir.1994) (considering whether consideration of the issue would benefit from a more concrete setting in determining whether an issue is fit under the Abbott test). Although a case is more likely to be fit if it involves pure legal questions that require little factual development, San Diego County Gun Rights Committee, 98 F.3d at 1132, fact-intensive inquiries that depend on further factual development may nevertheless be ripe if, as here, that development would do little to aid the court's decision. In the bankruptcy context, there are many situations in which the factual context may never be ideally well-developed. Congress has given bankruptcy courts the task of undertaking complex factual inquiries that depend, by their very nature, on future events and contingencies. Whether a bankruptcy court decides to lift an automatic stay depends upon its assessment of the debtor's ability to adequately protect against future decline in the collateral's value and ultimately successfully reorganize. 11 U.S.C. §§ 362(d), 363(e); United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 377, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). At that moment the bankruptcy court essentially must predict whether the debtor is doomed or has some reasonable chance of rehabilitation. Whether a bankruptcy court decides to confirm a Chapter 13 plan depends upon the likelihood that the debtor will be able to make all required payments under the plan. 11 U.S.C. § 1325(a)(6). In all of these situations, delay is unlikely to provide much, if any, additional benefit to the bankruptcy court's resolution of the issue. The same is true here: The undue hardship inquiry itself contemplates factual contingencies many years into the future. See Coleman, 333 B.R. at 847. Under the second prong of the undue hardship test, the debtor must show 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. Saxman, 325 F.3d at 1173. Many student loan repayment periods are thirty years in durationa significant portion of this period is far longer than the duration between the initiation and conclusion of the Chapter 13 plan. A determination of lack of ripeness due to the factual contingency of the debtor's financial situation makes little sense since the court must always speculate on debtor's financial situation years into the future. Educational Credit also argues that the determination whether the debtor has made good faith efforts to repay the loans, Saxman, 325 F.3d at 1173, cannot be made until at or near plan completion. However, whether it is premature for the court to make such a determination varies depending on each debtor's situation. See, e.g., Ekenasi, 325 F.3d at 547. If the debtor has been trying in vain to make student loan payments for the past fifteen years, the facts may be sufficiently well developed for the court to conclude that the debtor made good faith efforts to repay. If, on the other hand, the debtor files for bankruptcy immediately upon graduating from college, it will likely be necessary to wait the duration of the plan before a good faith determination is possible. Here Coleman has been trying to repay her student loans since 1999, which seems to us a sufficient amount of time for the bankruptcy court to evaluate whether she has made a good faith attempt at repayment. We disagree with the Eighth Circuit's conclusion that bankruptcy courts should not make an undue hardship determination until the time of discharge because the factual question is whether there is undue hardship at the time of discharge, not whether there is undue hardship at the time that a § 523(a)(8) proceeding is commenced. Bender, 368 F.3d at 848. The bankruptcy court below correctly noted that there is no clause in § 523(a)(8) specifying that the undue hardship must exist exactly at the time of discharge. Coleman, 333 B.R. at 849. The Fourth Circuit's approach permits a debtor to choose the snapshot date for determining undue hardship on the grounds that the text of the pertinent statute does not prohibit such an advance determination. Ekenasi, 325 F.3d at 547. This approach is consistent with the statute and makes sense in light of Bankruptcy Rule 4007(b). While that rule could not, of course, render a constitutionally unripe matter ripe, it counsels in favor of a finding of prudential ripeness.
Hardship to the debtor from postponing a decision in this situation supports a finding of ripeness. Abbott, 387 U.S. at 149, 87 S.Ct. 1507. Here, the hardship to Coleman is committing to a Chapter 13 plan for three to five years without any guarantee that her student loans will be discharged at the end of this time period. Because debtors must commit all of their disposable income to payments under a Chapter 13 plan, 11 U.S.C. § 1325(b)(1)(2), five years repayment is a considerable burden to bear without any guarantee that the debt will be ultimately discharged. 11 U.S.C. § 1328(a)(2). Theoretically, Coleman could convert her case to a Chapter 7 bankruptcy, assuming that she meets the requirements for filing under that Chapter, [22] and receive a discharge under 11 U.S.C. § 727(a). However, it appears the reason Coleman filed under Chapter 13 rather than Chapter 7 was that she was unable to afford an up-front payment for the undue hardship litigation. In Chapter 7, debtors' attorneys may not be paid from the estate, so unless the attorney is paid up-front, she is unlikely to be paid. [23] In a Chapter 13, however, the attorney is often paid as part of the plan. [24] Because Coleman apparently cannot finance the undue hardship litigation up-front, she would have to proceed with the undue hardship litigation pro se, if at all. A fundamental purpose driving the bankruptcy system is to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes. Local Loan v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934). Debtors who are primarily burdened by student debt will not emerge from bankruptcy with a fresh start if those student loan debts are not dischargeableand if they are forced to pursue the undue hardship matter pro se, the likelihood of a successful undue hardship hearing is probably substantially reduced given the complexity of the inquiry. See generally, Feather D. Baron, The Nondischargeability of Student Loans in Bankruptcy: How the Prevailing Undue Hardship Test Creates Hardship of Its Own, 42 U.S.F. L.Rev. 265 (2007). Because the undue hardship standard is extremely difficult to meet, [25] a debtor who would meet the undue hardship standard and yet is unable to obtain an undue hardship determination because it is not yet ripe may be forced to rely on public benefitsor may turn to credit as a means of meeting their basic needs. See generally, Elizabeth Warren, Less Stigma or More Financial Distress: An Empirical Analysis of the Extraordinary Increase in Bankruptcy Filings, 59 Stan. L.Rev. 213 (2006). In a case where a debtor faces genuine undue hardship from student loan debt, the debtor's best shot at a fresh start may be to litigate the matter in a Chapter 13 case. [26] Prudential ripeness considerations do not warrant taking the undue hardship determination away from the bankruptcy court at the time when its resolution may be integral to successful completion of the plan. Absent a constitutional ripeness impediment to the undue hardship determinationwhich does not exist herewe see no prudential reason to delay the determination where the record, as here, is sufficiently well-developed for the bankruptcy court to undertake the analysis. AFFIRMED.