66 year-old Debtor who had Sufficient Assets and Income, the Ability to Reduce Expenses and the Chance to Apply for Income Contingent Repayment Plan, Could Not Discharge Student Loans

66 year-old Debtor who had Sufficient Assets and Income, the Ability to Reduce Expenses and the Chance to Apply for Income Contingent Repayment Plan, Could Not Discharge Student Loans

Plaintiff and his wife  filed a joint petition for chapter 7 bankruptcy relief on August 24, 2015. They are both 66 years old and have two adult children—a daughter and a son. Plaintiff incurred the Student Loans owed Defendants to finance the education of his son. Plaintiff retired three years ago, having previously worked for 34 years. Debtor’s wife is unemployed. Debtors own their residence, appraised at $52,000 in February 2015. There is an outstanding mortgage balance of approximately $18,000 that, assuming ongoing monthly payments, will be paid in full by October 2022. Notwithstanding the value reflected by the appraisal, the property is assessed at $72,000 for tax purposes. Debtors have not sought to reduce that assessment.

Assets and Liabilities

In addition to their residence, Debtors listed as assets a (i) 2005 Cherokee 28′ travel trailer valued at $5,000 (“Camper”), (ii) 2001 Dodge Dakota valued at $1,600, (iii) 2008 Jeep Cherokee valued at $9,800, (iv) 2009 EZ-Go golf cart valued at $2,500 and (v) 1991 Glastron 16′ motor boat valued at $2,200. Debtors also listed a checking account with a zero balance at First Niagara Bank with a zero balance. All of the foregoing property was claimed as exempt by Debtors pursuant to 11 U.S.C. § 522(b)(2).

Investment Accounts

Although not disclosed on Debtors’ Schedule of Assets, Debtor testified that he has an interest in a (i) 401(k) account (“401(k)”), (ii) Fidelity roll-over IRA (“IRA”) (together referred to as “Investment Accounts”) and (iii) MetLife retirement annuity (“Annuity”). The value of the Investment Accounts and Annuity on the petition date is unknown, but as of November 2012—when the student loan repayment period commenced—the 401(k) was valued at $209,108.44. That same month, Debtor withdrew $137,150.69, which he rolled into the newly created IRA, leaving a balance in the 401(k) of $71,957.75. In December 2013—with funds from the IRA-Debtor purchased the Annuity for $100,000.  As of December 31, 2016, the value of the Annuity was $98,720.99. Debtor has not claimed the Annuity or Investment Accounts as exempt.


Debtor’s Schedule F—Creditors Holding Unsecured Non-Priority Claims—reflects debt of $141,614, of which $13,526 is attributable to credit cards and the balance, $128,088, is attributable to the Student Loans. Debtor testified that his wife had previously paid his credit card debt in full more than once, and that his Student Loans were the primary reason for his bankruptcy.

Student Loan History

Of the $141,614 of unsecured debt listed by the Debtors, 90% is attributable to the Student Loans incurred by Plaintiff to pay for his son’s college education. The Student Loans came due in November 2012, six months after Plaintiff’s son graduated from college. Plaintiff has made no payments to either Defendant on the Student Loans.

ECMC advised Plaintiff of the availability of the William D. Ford Federal Direct Loan Program (“Ford Loan Program”), which would provide him the option to make reduced monthly payments through an Income Contingent Repayment Plan (“Repayment Plan”). A Repayment Plan would allow Debtor to consolidate his Student Loans and cap his monthly payment at 20% of his monthly discretionary income, with the proviso that any unpaid balance remaining after 25 years of payments would be forgiven. Debtor has declined to pursue this or an alternative repayment program offered by Defendants pending resolution of this adversary proceeding.

Income during the Repayment Period

In 2012, Debtors’ adjusted gross income (“AGI”) was $38,853. The following year, Debtors’ AGI was $59,648, due to an increase of $22,000 from an IRA distribution. In 2014, Debtors’ AGI was $53,322, of which amount $14,500 represented an IRA distribution. In 2015, Debtors’ AGI was $19,267, $16,050 of which was an IRA distribution

Beginning in 2016, Debtor began receiving monthly annuity income of $431.72 and monthly Social Security payments of $1,460.20. Combined with his wife’s Social Security payments of $653.20 per month, Debtors’ monthly household income totals $2,545.12.


Debtors’ fixed monthly expenses are at least $3,044,8 and the monthly shortfall between their income and expenses is approximately $499. Their monthly expenses include approximately $265 for maintaining the Camper and campsite rental and a $556.79 mortgage payment, which includes an escrow for real property taxes. Debtor testified that he withdraws money from one of his Investment Accounts to meet his expenses when his income falls short.

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