Court Opinion

ID: 9687013
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:13:52.230378+00
Date Added: 2024-06-11T18:18:23.728820
License: Public Domain

SCHERMER, Bankruptcy Judge
dissenting.
STANDARD OF REVIEW
The majority correctly states that determination of undue hardship is a factual determination and is reversible only for clear error. Andresen v. Neb. Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 128 (8th Cir. BAP 1999). I believe the majority incorrectly applies the clearly erroneous standard and, therefore, I respectfully dissent.
DISCUSSION
Pursuant to Section 523(a)(8) of the Bankruptcy Code, a student loan obligation is excepted from discharge “unless excepting such debt from discharge ... will impose an undue hardship on the debt- or and the debtor’s dependents.” 11 U.S.C. § 523(a)(8). The debtor bears the burden of proving undue hardship by a preponderance of the evidence. Woodcock v. Chemical Bank, NYSHESC (In re Woodcock), 45 F.3d 363 (10th Cir.1995); Andrews v. S.D. Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702, 704 (8th Cir.1981); Standfuss v. U.S. Dept. of Educ. (In re Standfuss), 245 B.R. 356, 359 (Bankr.E.D.Mo.2000); Kopf v. U.S. Dept. of Educ. (In re Kopf), 245 B.R. 731, 734-36 (Bankr.D.Me.2000), citing Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991); Clark v. United Student Aid Funds, Inc., 240 B.R. 758, 761 (Bankr.W.D.Mo.1999).
Congress’ intent in excepting student loans from discharge was clear: Congress wanted to prevent the “undeserving student borrower from abusing the bankruptcy process.” Andresen v. Neb. Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 130 (8th Cir. BAP 1999). Congress did not, however, define undue hardship. As the majority correctly points out, in the Eighth Circuit, the test for undue hardship requires an inquiry into the totality of circumstances with special attention to the debtor’s current and future financial resources, the necessary reasonable living expenses for the debtor and the debtor’s *352dependents, and any other circumstances unique to the particular bankruptcy case. Andrews v. S.D. Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir.1981); Andresen v. Neb. Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 139-40 (8th Cir. BAP 1999).
The Appellant argues that the bankruptcy court erred in applying the totality of circumstances test to the Debtor’s situation and in determining that excepting the loan from discharge would impose an undue hardship on the Debtor. I agree with the Appellant.
I. The Debtor’s Current and Future Financial Resources
The bankruptcy court erred when it found the Debtor’s gross monthly income to be $1,979.00 and her monthly take home pay to be $1,424.88. At trial, the Debtor introduced into evidence her pay stub for regular pay for September, 1999, and her pay stubs for overtime pay for September, October, and November, 1999. (Pl.’s Ex. 6.) Her regular pay stub clearly indicates that her gross pay for September, 1999, was $2,078.00 and that her net pay was $1,578.08. Furthermore, her overtime pay stubs indicate gross and net overtime pay for September, 1999, of $83.92 and $76.66, respectively, gross and net overtime pay for October, 1999, of $71.93 and $65.71, and gross and net overtime pay for November, 1999, of $311.70 and $284.73. The Debtor earned on average $142.35 net overtime pay for each month for which evidence was provided. No testimony was presented to contradict these amounts. When the average net overtime pay is added to the Debtor’s regular monthly net pay, her total monthly take home pay is $1,720.43. The bankruptcy court understated the Debtor’s monthly net pay by $295.55. This additional monthly income is sufficient to enable the Debtor to repay her student loan obligation to Appellant at the rate of $283 per month under the income contingent repayment plan offered by the Appellant. The bankruptcy court’s failure to consider the Debtor’s take home pay as evidenced by her pay stubs — the most accurate evidence of her current rate of pay — is clear error mandating reversal.
Furthermore, when determining the Debtor’s current and future financial resources, the bankruptcy court did not take into account the fact that the Debtor has voluntarily chosen to minimize her income. The Debtor cannot voluntarily reduce her income and then seek a discharge of her student loan debt as an undue hardship. U.S. Dept. of Educ. v. Rose (In re Rose), 227 B.R. 518, 525 (W.D.Mo.1998); Healey v. Mass. Higher Educ. (In re Healey), 161 B.R. 389, 394-95 (E.D.Mich.1993);3 Lehman v. N.Y. Higher Educ. Serv. Corp., 226 B.R. 805, 808 (Bankr.D.Vt.1998). The majority determines that the bankruptcy court properly found that the Debtor was unable to maintain a job that paid more than her present job and therefore concludes that the Debtor did not voluntarily limit her income. I disagree. The Debtor clearly voluntarily left several jobs which paid more than her current job.4 In addi*353tion, the majority fails to address the fact that the Debtor has taken no other steps to increase her income, such as obtaining a second job of a menial nature which would fit within her self-imposed comfort level. The Debtor has no dependents and the record reflects no other factors which would prevent her from obtaining additional employment to supplement her income. Alternatively, the Debtor has not sought employment in any other fields for which her skills are suited and which might pay more.
The Debtor bears the burden of proving undue hardship. The bankruptcy court erred when it equated the Debtor’s present voluntarily limited income with the Debtor’s present and future financial resources without holding the Debtor accountable for the available options for an individual with the Debtor’s educational background and job skills to increase her income even if she continues to limit herself to jobs within her self-imposed comfort level.
II. The Debtor’s Necessary Reasonable Living Expenses
The majority determines that the Debt- or lives very modestly. The bankruptcy court found that the Debtor’s monthly expenses as listed on her schedules and as supplemented by her testimony are “both modest and reasonable.” (Mem.Op. at 7.) While the Debtor’s expenses may be modest, they must be considered in relation to her income and her student loan obligation. The bankruptcy court erred when it determined that the Debtor would suffer an undue hardship if required to repay her student loan to Appellant in light of her monthly income and expenses. The Debt- or listed monthly expenses of $1,424.88 on her bankruptcy schedule of current expenditures. Her schedules differed from her testimony, however. She testified to monthly expenses which aggregate $971.50. Such testimony included $100 per month for food plus an unknown amount for a special diet. In contrast, she listed monthly food costs in her schedule at $200. Additionally, her testimony did not address her scheduled expenses of $20 for medical and dental expenses, $73 for automobile insurance, $50 for recreation, and $25 for charitable contributions. When these scheduled expenses as well as the additional $100 scheduled monthly food cost are added to the aggregate monthly expenses about which she testified, her monthly expenses total $1,259.50.
The Debtor testified that she has made an offer to repay nondischargeable taxes owed to the Internal Revenue Service and to the State of Missouri at the rate of $50 per month each. When these payments are added, her monthly expenses total $1,359.50. The Debtor’s net monthly income of $1,720.43 exceeds her total monthly expenses, including her projected payments for the nondischargeable tax liability, by $360.93 which is more that enough to fund payments under the income contingent repayment plan offered by Appellant.
The bankruptcy court noted that the Debtor no longer had a monthly car payment of $250 as included in her scheduled expenses because she had paid off the car loan, yet determined that an “allowance of $250.00 per month for maintenance and/or payments is reasonable.” (Mem.Op. at 7-8.) The Court’s allowance of $250 per month did not recognize that the Debtor *354included in her testimony expenses of $130 per month for maintenance, gas, and oil.5 (Tr. at 8.) If we assume the bankruptcy court was correct in determining that $250 per month is a reasonable amount to spend for a car payment and/or maintenance, the Debtor has already testified to and been given credit for $130 per month for gas and regular maintenance. If we add an additional $120 per month to her aggregate monthly expenses (the difference between what she testified to as her actual expenses and what the court deemed reasonable), her monthly expenses aggregate $1,479.50. When this amount is subtracted from the Debtor’s net monthly pay of $1,720.43, she has a monthly surplus of $240 which could be used to repay her student loan obligation.6
While the Debtor’s monthly surplus under this analysis is $42 shy of the $283 needed to make payments under the income contingent repayment program, this analysis has not taken into consideration the reasonableness of monthly expenses of $30 for cable, $50 for recreation, and $25 for charitable contributions, which if eliminated from her budget would provide the Debtor with additional surplus of $105 per month. Such surplus is more than sufficient to fund repayment of Debtor’s student loan obligation to Appellant under the income contingent option, leaving the Debtor $63 per month discretionary income to spend as she sees fit.
The intent here is not to dictate how the Debtor should spend her money; however, I must note that she bears the burden of proving undue hardship. The bankruptcy court erred when it concluded that the Debtor met that burden. The Debtor failed to demonstrate that her necessary reasonable living expenses are such that she will face an undue hardship if required to repay her student loan.
III. Other Circumstances Unique to Debtor’s Bankruptcy Case
The bankruptcy court found that the Debtor “appears to be uncomfortable with any position where her tasks are anything other than repetitive and ministerial,” (Mem.Op. at 3), and concluded that the Debtor is “totally lacking in self-confidence.” (Mem.Op. at 7-8.) The bankruptcy court found that each time the Debtor attempted a job which involved discretion or decision making responsibilities, she was “unable to adequately perform such tasks.” (Mem.Op. at 3-4.) Nowhere does the record indicate that the Debtor was unable to perform any of the higher-paying jobs she attempted. She was never fired or asked to leave any of these jobs. To the contrary, she left each job of her own accord. Undoubtedly the bankruptcy court was correct in determining that the Debtor lacks self-confidence; I do not dispute that finding nor do I question the trial court’s determination that the witness was credible. However, a lack of self-confidence does not constitute a unique circumstance which contributes to or establishes undue hardship under Section 523(a)(8) of the Bankruptcy Code. Lehman v. N.Y. Higher Educ. Serv. Corp., 226 B.R. 805, 808 (Bankr.D.Vt.1998) (healthy, unmarried thirty-four year old with no de*355pendents was not entitled to an undue hardship discharge based on his testimony that he terminated a job due to “apparent work-related mental stress”).
The bankruptcy court noted that under the income contingent repayment program offered by Appellant, the Debtor would have to make payments for in excess of thirty-five years to pay off her student loan. The majority points out that the Debtor would be seventy years old when she pays off her loan under this alternative.7 The Debtor opted to invest in an education. Yes, she will be paying for that education for a long time; however, she will have the benefit of that education for her entire lifetime. It appears that the only hardship in this case is the length of repayment; however, the length of repayment does not establish undue hardship. See, e.g. Kopf v. U.S. Dept. of Educ. (In re Kopf), 245 B.R. 731 (Bankr.D.Me.2000).8
The bankruptcy court also noted that the Debtor “obtained an education that was not worthwhile to her financially.” (Mem.Op. at 9.) The court should not consider the debtor’s choice of education in deciding whether to discharge a loan. The risk of marketability of the student’s selected education should be borne by the student, not the lender. Otherwise, lenders might be forced to limit education loans to the pursuit of what the lender perceives as marketable degrees and “students might find it impossible to get student loans to study art history or philosophy.” Melton v. N. Y. State Higher Educ. Serv. Corp. (In re Melton), 187 B.R. 98, 104 (Bankr.W.D.N.Y.1995). Furthermore, this is not the case of an individual who borrowed money to attend an unaccredited trade school. The Debtor earned an undergraduate degree from an accredited college and a postgraduate degree from an accredited university.
The “other circumstances” which courts have generally recognized in determining undue hardship are budgetary constraints which are beyond the debtor’s control and which usually result from physical or mental disability of the debtor or the debtor’s dependents. See, e.g., Andrews v. S.D. Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir.1981); Andresen v. Neb. Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 139-40 (8th Cir. BAP 1999). The Debtor is a healthy thirty-four year old with no dependents. Healey v. Mass. Higher Educ. (In re Healey), 161 B.R. 389, 391 (E.D.Mich.1993) (undue hardship discharge denied for healthy, unmarried twenty-eight year old with no dependents); Lehman v. N.Y. Higher Educ. Serv. Corp., 226 B.R. 805, 808 (Bankr.D.Vt.1998) (undue hardship discharge denied for healthy, unmarried thirty-four year old with no dependents). She has failed to establish any unique circumstances which would justify the discharge of her student loan obligation to Appellant.
CONCLUSION
The majority notes that it is not the place of the appellate court to re-evaluate *356the evidence. This is true. The appellate court’s role is not to second guess the trial judge but rather to review the record to determine if the evidence supports the trial court’s conclusions.
The majority concludes that the bankruptcy court properly cited and applied the totality of circumstances test for undue hardship. While I agree that the bankruptcy court cited the proper test for undue hardship, I disagree with the majority’s conclusion that the bankruptcy court properly applied that test. It is the role of the appellate court to determine whether the evidence supports the trial court’s conclusion. Where clear error exists, the appellate court must reverse the trial court. I conclude that the evidence does not support a finding of undue hardship, that the Debtor has failed to meet her burden of establishing undue hardship under Section 523(a)(8) of the Bankruptcy Code, and that the bankruptcy court clearly erred when it determined that the Debtor’s student loan obligation to Appellant should not be excepted from discharge because to do so would impose an undue hardship. Accordingly, I would reverse the order of the bankruptcy court.

. The Healey court applied the Brunner totality of circumstances test, under which it mechanically tested the debtor's economic situation to determine if the debtor could repay her student loan obligations. The court concluded that the debtor had failed to maximize her income and therefore would not be discharged from her student loan obligations as an undue hardship. The Eighth Circuit Bankruptcy Appellate Panel has noted that the "Brunner test and the Andrews test are similar, with the controlling [in the Eighth Circuit] Andrews test simply allowing a broader consideration of the case and any factors specific to a given debtor's particular situation.” Andresen v. Neb. Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 140 (8th Cir. BAP 1999). In light of this instruction, it is appropriate for this court to seek guidance from other courts’ application of the economic prong of the Brunner test in evaluating the debtor’s financial resources and necessary reasonable living expenses under the Andrews test.

. On a number of occasions the Debtor attempted employment with greater responsibility and greater pay than her present position. For example, she took a position as an efficiency case manager for DFS for approxi*353mately four months, she took a position with the disability determinations department for approximately nine months, and she took a position at a drug rehabilitation center. The position as the efficiency case manager paid $100 to $200 per month more than her present position. In each instance, the Debtor voluntarily left the alternate employment to return to her present position as a case manager. According to the Debtor, the alternate positions she attempted were "too high stress for [her],” yet she has never been diagnosed with a learning disability or other medical condition which impacts her ability to perform a job. (Tr. at 17-18.) The Debtor is uncomfortable in a job other than one requiring simple repetitive tasks, (Tr. at 18.), and therefore has voluntarily left several jobs which did not fall within her self-imposed comfort level.

. These costs do not include the $11 per month she spends on personal property taxes, the $2.50 per month cost of maintaining her drivers license, nor the $73 per month she pays for automobile insurance. If these costs are added to the permitted $250 for car payment and/or maintenance, her actual monthly expenses related to her vehicle total $336.50.

. See Kopf v. U.S. Dept. of Educ. (In re Kopf), 245 B.R. 731 (Bankr.D.Me.2000). In Kopf court refused to discharge the debtor's scheduled student loan obligation of $14,761.82 where the debtor’s monthly income exceeded her monthly expenses by $66. The court noted that the debtor's budget did not include any car payment, that she pays $80 per month for transportation expenses and $26 per month for insurance, that her car has 170,000 miles on it, and that the debtor anticipates additional transportation expenses in the near future, given the age and wear and tear on the vehicle. Nonetheless, the court refused to discharge the debt nor did it give the debtor any credit in her budget for a car payment which would undoubtedly be needed in the near future.

. The majority notes that the Debtor has made only two payments toward her student loan obligation in ten years. Had she made payments when they became due, or even partial payments, the repayment period would be substantially shorter. The Debtor cannot create an undue hardship by failing to make payments for ten years and then complain that the repayment period is too long.

. In Kopf, the court refused to discharge the debtor's scheduled student loan obligation of $14,761.82 where the debtor’s monthly income exceeded her monthly expenses by $66. The student loan creditor's policies permit the debtor to apply for an amended decelerated repayment schedule based on monthly income and expenses. Under the plan, if the debtor were unable to make monthly payments, her payment would be set at zero. While the Kopf record does not reflect the rate at which interest accrues on the $14,-716.82 loan balance, it is clear that with a monthly payment ranging from zero (the minimum payment) to $66 (the amount of debt- or's budget surplus), the debtor would not be able to retire the student loan indebtedness for an extended period of time, if ever. Nonetheless, the Kopf court refused to discharge the loan as an undue hardship.