Opinion ID: 164299
Heading Depth: 2
Heading Rank: 2

Heading: Did Ms. Polleys Establish Undue Hardship?

Text: 36 Normally, we would remand for the bankruptcy court to apply the test we announce today. Such a remand is unnecessary because the bankruptcy court's factual findings are sufficiently complete to decide the undue hardship issue. 37 ECMC apparently does not dispute the bankruptcy court's implicit finding that Ms. Polleys satisfied the first part of the Brunner test, that she cannot maintain a minimal standard of living while repaying the student loan debt. As the bankruptcy court found, Ms. Polleys has no discretionary income, lives at the largesse of her parents, and is unemployed. Bankr.Ct. Opin. at 4. 38 ECMC argues that Ms. Polleys cannot satisfy the second Brunner part — that circumstances indicate that her state of affairs is likely to persist for a significant portion of the repayment period of the student loans — because she cannot prove that she has a medical disability. ECMC, however, ignores the bankruptcy court's extensive findings of Ms. Polleys's emotional health. The court found that Ms. Polleys suffers from debilitating emotional problems which, though counterproductive, are obviously out of her control. Id. Moreover, medication was necessary for her to function, but that medication affected her memory and communication skills negatively. Id. Ms. Polleys's inability to hold a job due to emotional outburst and a low tolerance for stress is not a problem of her own making, but affects her ability to earn more than a nominal living. Id. This condition is likely to persist into the foreseeable future, and even with a modest improvement in income [there is] no way that Ms. Polleys can repay $51,000 plus accruing interest. Id. Ms. Polleys's mental health problems are at least as substantial and long lasting as the disability the Ninth Circuit found to be sufficient to preclude the debtor from paying her student loan in In re Pena, 155 F.3d 1108 (9th Cir.1998). In Pena, the court held that the debtor's depression prevent[ed] long-term stability and was likely [to] continue to interfere with her ability to work. Id. at 1113. 39 The fact that Ms. Polleys stipulated that she has no medical or physical condition that prevents her from retaining work does not carry the day for ECMC. D. Ct. Opin. at 5. Ms. Polleys did not stipulate that she has no medical condition that affects her ability to work or earn a substantial income. The bankruptcy court found just the opposite and its findings are not clearly erroneous. 40 More fundamentally, although ECMC argues that  typically, prospective undue hardship is proven by medical disability, Aplt. Br. at 25 (emphasis added), the cases do not suggest that a permanent medical disability is any kind of prerequisite to discharging a student loan debt. In In re Cheesman, 25 F.3d 356 (6th Cir. 1994), there was no evidence of any medical problems. The wife had lost her job after she took a maternity leave; the husband earned a gross salary of $1,123 per month. Although the husband was hoping for a promotion at his current job, and the wife was actively seeking employment, the court noted that there was no assurance... that either will obtain their objectives, id. at 360, and that the Cheesmans were headed in a downward spiral and will continue to go deeper in debt, id. at 359. Thus, although a permanent medical condition will certainly contribute to the unlikelihood of a debtor earning enough money to repay her student loan debt, it is by no means necessary if the debtor's situation is already bleak. 41 Additionally, ECMC's reliance on In re Brightful, 267 F.3d 324 (3d Cir.2001), for the proposition that a debtor must show additional circumstances to support a discharge is misplaced. In Brightful, the bankruptcy court made no finding of the nature of Brightful's emotional and psychiatric problems, or how these problems prevent her from being gainfully employed. Id. at 330. In contrast to Ms. Polleys's situation, Brightful was intelligent, physically healthy, currently employed, possesses useful skills as a legal secretary, and has no extraordinary, non-discretionary expenses. Id. Moreover, Brightful's only daughter was just two years away from the age of majority, and therefore Brightful's obligation to support her was nearly at an end. Id. 42 Finally, the facts indicate that Ms. Polleys is seeking to discharge her student loan debt in good faith. ECMC admits that the good faith inquiry requires determining whether a debtor's circumstances are the result of factors beyond her reasonable control. Aplt. Br. at 30. However, ECMC bases its claim of lack of good faith only on (1) the fact that Ms. Polleys has never made a single payment on her student loans, and (2) her decision to leave a good paying job and move to Wyoming to live with her parents. 43 First, the failure to make a payment, standing alone, does not establish a lack of good faith. See In re Coats, 214 B.R. 397, 405 (Bankr.N.D.Okla.1997) (There is no per se requirement that a debtor pay a certain percentage or minimum amount of the loans at issue in order to meet the good faith requirement.). Additionally, unlike in Brunner, where the debtor filed for discharge within a month of the date for the first payment of her loans came due ... [and never] requested a deferment of payment, 46 B.R. at 758, Ms. Polleys did not immediately seek to discharge her student loan obligation after it came due. Rather, she consolidated the loan, and entered into the deferral programs. When the student loan creditors demanded payments of $800.00 per month, she tried to negotiate with them. Ms. Polleys's efforts to cooperate with her lenders show that she was acting in good faith in working out a repayment plan. 44 Moreover, the good faith part can be satisfied by a showing that Ms. Polleys is actively minimizing current household living expenses and maximizing personal and professional resources. In re Woodcock, 149 B.R. 957, 961 (Bankr.D.Colo. 1993). Ms. Polleys could do little more to minimize her current household living expenses: she lives in a basement apartment in her parents' home, and pays no rent or utilities other than her phone bill. Any failure on her part to maximize her personal and professional resources is due to her mental health condition, which is beyond her control. 45 Finally, there is no indication that Ms. Polleys is attempting to abuse the student loan system by having [her] loans forgiven before embarking on lucrative careers in the private sector. Cheesman, 25 F.3d at 360. On the contrary, Ms. Polleys has tried to use her education to maximize her income. She has tried to work for accounting firms, to no avail. Then she tried to open her own accounting practice, and that failed too. She has not been able to pass the CPA Exam despite several attempts. Additionally, Ms. Polleys has even sought employment outside her accounting field, only to be laid off from her last job in a local nursery. It is clear that Ms. Polleys has been trying her best in good faith to become financially independent, but that circumstances beyond her control are keeping her from reaching that goal. In light of these factors, Ms. Polleys meets the undue hardship requirement of § 523(a)(8). 46 AFFIRMED.