Court Maintains Perfect Record of Never Discharging Student Loans by Applying Undue Hardship Test Tougher than the Brunner test

Court Maintains Perfect Record of Never Discharging Student Loans by Applying Undue Hardship Test Tougher than the Brunner test

Debtor attended Community College during the Spring and Fall semesters of 2012. At the time, Debtor was fifty-seven years old. She financed a portion of these semesters through the William D. Ford Federal Direct Loan Program with the Department of Education. She obtained a loan of $3,500 on February 14, 2012, and another loan of $3,500 on September 21, 2012 (together, the “Loans“).

        The Loans with the Department of Education went into repayment status in December 2013. Debtor failed to make payments on the Loans as they became due and consequently was placed in default forbearance. She did make payments on the Loans in April 2014 in the amount of $41.24, and May 2014 in the amount of $41.61. These were the only payments made by Debtor on the Loans.

        As of March 12, 2017, there was due and owing a principal sum of $7,110.87 and interest of $695.58. In total, Debtor’s outstanding balance is $7,806.45, with interest accruing at $0.66 a day. Under an amortizing repayment plan, payments on the Loans would be approximately $77 a month. Debtor has never applied for a discharge with the Department of Education based on total disability, which would allow the Loans to be administratively discharged if Debtor could establish a disability and prove an inability to work any position. Nor has Debtor submitted an application for the Income Based Repayment Plan, which would allow Debtor to make payments of $0 per month as long as her income remains less than $15,930 a year. After 20 to 25 years, any balance on the student loans would be forgiven, but the amount of debt forgiveness could have tax implications because it would likely be recognized as taxable income under current law.

        Debtor is now sixty-two years of age. She was diagnosed with diabetes in the mid-1980s and suffers from diabetic neuropathy. Debtor has managed her condition ever since she was diagnosed, but in 2014, Debtor’s condition worsened. As a result of the diabetic neuropathy, Debtor began suffering from its common yet debilitating symptoms: muscle weakness, pain, and numbness in her legs and feet after standing for extended periods of time. She continues to manage her condition through a charitable program at a local hospital, but the symptoms persist, and no cure for diabetic neuropathy currently exists.

        Notwithstanding the two semesters at college, Debtor only has a high school degree. From 2004 until 2016, she was employed as a full-time customer service representative. Despite the diabetic neuropathy, she was able to maintain this employment due to its sedentary nature. In 2015, her reported income on her Statement of Financial Affairs was $22,880. In September 2016, she was terminated for violating company policy by wearing headphones and listening to music during her lunch break, and her income according to her Statement of Financial Affairs for that year was $16,812. Post termination, Debtor worked at three different jobs, but was unable to sustain employment due to her medical condition.

        On March 24, 2017, Debtor filed a petition for Chapter 7 bankruptcy.2 She has remained unemployed for nearly a year since January 2017. Debtor concedes that she is able to perform a full-time sedentary position and continues to seek employment, but so far, the search has been to no avail. She currently has no income—the only income listed in her Schedule I is approximately $194 per month in food stamps. Her vehicle listed in Schedule A has been repossessed. The value of her personal assets is only $1,225 according to her Schedule B. Schedule J listed her monthly living expenses at $640, which included a $200 monthly rent contribution to her boyfriend, but circumstances have changed. Debtor lost the support of her boyfriend, currently faces an eviction notice, and has been forced to find a new residence. She also does not qualify for Medicaid or Medicare.

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