In this adversary proceeding, the Debtor seeks a determination that her student loan debt to the United States Department of Education (“the DOE”) is dischargeable under 11 U.S.C. §523(a)(8). Under §523(a)(8), student loan debt is dischargeable only if repayment of the debt would impose an “undue hardship” on the debtor and the debtor’s dependents.
This Circuit employs what is known as the “Brunner” test for determining undue hardship under §523(a)(8). See In re Faish, 72 F.3d 298, 306 (3d Cir. 1995) (following Brunner v. N.Y. State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987)). The Brunner test requires a debtor seeking to discharge her student loans to prove that:
(1) based on current income and expenses, the debtor cannot maintain a “minimal” standard of living for herself and her dependents if forced to repay the loans;
(2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period for the student loans; and
(3) the debtor has made a good faith effort to repay the loans.
Faish, 72 F.3d at 304-05 (quoting Brunner, 831 F.2d at 396).
In this case, the immediate cause of the Debtor’s financial difficulties that led to her bankruptcy filing was a marital separation (which will lead to a divorce), which has left her as the sole custodian of three (3) young children, with reduced income for her family’s support.
As detailed below, several factors complicate the application of the Brunner test in this adversary proceeding:
• the DOE does not dispute that, presently, the Debtor cannot repay the subject loan while maintaining a minimal standard of living for herself and her three (3) children, thereby satisfying the first Brunner prong;
• there is no dispute that the Debtor has acted in good faith, thereby satisfying the third Brunner prong;
• the Debtor is relatively young and healthy, but works only part-time due to structural obstacles in the labor market in her professional field (vascular sonography);
• the Debtor may be eligible for an income-based, long term extension of the repayment period for her loan, but, in good faith, has elected not to enter such a program;
• in light of the Debtor’s qualifications and license as a vascular sonographer and the fact that her children will become adults and responsible for their own support, the Debtor will likely have the ability to make repayments on the subject student loan, while maintaining a minimal standard of living at some eventual point in the future;
• the parties dispute whether the second Brunner prong should be applied by evaluating the Debtor’s future prospects within the remaining seven (7) year term of the Debtor’s loan or a substantially longer time frame based on a potentially available income-based, extended term loan repayment program.
The facts of this case and the legal issues presented have necessitated a close examination of the second prong of the Brunner test.
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