Bryant v. Educ. Credit Mgmt. Corp. (In re Bryant)

In re: Adam Harrison Bryant, Debtor.

Adam Harrison Bryant, Plaintiff v. Educational Credit Management Corp., Defendant.

No. 19-00292-ELG

Adv. Pro. No. 19-10012-ELG

United States Bankruptcy Court, District of Columbia

September 15, 2021

ORDER GRANTING ECMC'S MOTION FOR SUMMARY JUDGMENT

Elizabeth L. Gunn, U.S. Bankruptcy Judge.

The issue before the Court is whether the educational loan of the Debtor Adam Harrison Bryant owed to Educational Credit Management Corporation ("ECMC") is dischargeable under the exception to nondischargeability of student loans in 11 U.S.C. § 523(a)(8) as posing an undue hardship on the Debtor. The Debtor and ECMC filed and briefed cross motions for summary judgment, in which each party raised substantially identical arguments. The Court heard consolidated arguments thereon, and in order to provide the Debtor the most favorable inferences of the law and the facts, ruled on ECMC's motion. At the hearing held June 29, 2021, and upon consideration of the evidence and argument on the cross motions in the light most favorable to the Debtor, the Court orally granted summary judgment in favor of ECMC. This order memorializes the oral findings and rulings of the Court at that hearing.

Background

i. Procedural Background.

On May 1, 2019, the Debtor, with counsel, filed a petition for relief under Chapter 7 and also pro se, a complaint to determine, inter alia, the dischargeability of his student loan debt serviced by Nelnet Loan Services as of the filing (the "Complaint").^[1] See Compl., ECF No. 1. However, under the Family Education Loan Program ("FFELP"), lenders are prohibited from holding interests in student loans that are the subject of an adversary proceeding in bankruptcy. Mot. to Intervene, ECF No. 9, ¶ 4. Consequently, on May 23, 2019, the Debtor's student loan was assigned to ECMC. Id. Accordingly, on June 18, 2019, ECMC filed a Motion to Intervene in the Debtor's adversary proceeding as the party defendant because it held all right, title, and interest in the FFELP loan at issue. Id. ECMC's Motion to Intervene was granted on June 20, 2019 and ECMC became the named defendant in this adversary proceeding. Order Granting Mot. Intervene, ECF No. 27.

After the conclusion of discovery, the parties filed a joint pretrial statement including each party's list of exhibits and witnesses. See Joint Pre-Trial Statement, ECF No. 30. Trial on the Complaint was scheduled to begin on February 24, 2020; however, the trial was continued so that the Debtor could obtain pro bono counsel.^[2] Following the continuance, delays associated with the appointment of counsel and the onset of the COVID-19 pandemic prevented the scheduling of any further hearings on the matter indefinitely.^[3] The case resumed in October 2020 with the appointment of pro bono counsel for the Debtor.^[4] Order Appointing Counsel, ECF No. 44. On March 2, 2021, over a year after the original trial date, the Debtor filed his Motion for Summary Judgment. ECMC responded by filing a Motion to Strike the Debtor's Motion for Summary Judgment, arguing that it was not timely filed. Mot Strike Debtor's Mot. Dismiss, ECF No. 54. Due to the unique facts and circumstances of this case, including the intervening COVID-19 pandemic, the Court denied the Motion to Strike, and extended the time for ECMC to file its own Motion for Summary Judgment. See Am. Sched. Order, ECF No 63; Order Den. Def.'s Mot. Strike, ECF No. 64. ECMC filed its Motion for Summary Judgment on June 4, 2021 (collectively with Debtor's Motion for Summary Judgment, the "Motions") and the parties fully briefed the cross motions. Arguments on the Motions were heard at a consolidated hearing on June 29, 2021.

ii. Factual Background.^[5]

Prior to filing bankruptcy, the Debtor accrued student loan debt under the FFELP for higher education costs, including law school. The Parties agree that ECMC is the present holder of the Debtor's consolidated FFELP student loan. As of May 23, 2019, the outstanding principal balance of the loan was $76, 649.65, rising to $80, 694.33 as of June 2, 2021. At all times during the pendency of this adversary proceeding, the Debtor was in his early 40s, had no dependents, and had no documented illnesses or disabilities, either mental or physical, which impaired his daily life, or affected his ability to work.

After completing his legal education, the Debtor obtained a license to practice law in the Commonwealth of Virginia, was employed as a senior associate at KPMG, LLP, and was making timely payments on his FFELP loan. In July 2008, the Debtor pled guilty to criminal charges in the United States District Court for the District of Columbia, was sentenced to a period of incarceration, and, due to the nature of the offense, his license to practice law was revoked. Joint Pretrial Statement at ¶ 12, ECF No. 30. During the Debtor's incarceration, he promptly arranged with the loan servicer for the FFELP debt to be placed into abatement status. Id. at ¶¶ 14-15. After release from incarceration, the Debtor again promptly updated the debt servicer about his situation, change in income, and entered into a repayment agreement with monthly payments lower than the pre-incarceration amount. Id. at ¶ 16. The Debtor began making timely payments at this lower rate. Id. at ¶ 17. In July 2018, the Debtor applied for and was accepted into an income-driven repayment plan wherein his monthly payment was $0. Debtor's Dep. Oct 24, 2019, Ex. 3 at 107:19-108:20, ECF No. 66. The Debtor has remained in this repayment plan during the pendency of this case and has not failed to make any voluntary loan payments during that same period of time.

Due to the nature of the Debtor's criminal conviction, he was required to register as an offender in the District of Columbia, beginning at the time of his release on February 12, 2011 for a period of ten (10) years through February 18, 2021.^[6] Shortly after his release, the Debtor began living in College Park, Maryland, and rented an apartment for $700.00/month. Id. at ¶ 21. In September 2014, a change in policy of United States Probation Office for D.C. required the Debtor to relocate into D.C. resulting in a substantial increase in his costs of living. Id. at ¶¶ 23-24. The Debtor resided in D.C. until May 15, 2021, with the rent of his last apartment being $1, 691.75/month. Def.'s Mot. Summ. J., Ex. 20, ECF No. 66.

After satisfying the terms of his supervised release, in early 2021 the Debtor chose to relocate to San Diego, California. Def.'s Mot. Summ. J., Ex. 6, ECF No. 66. The Debtor's rent in California is $2, 025.00/month, including a $50.00/month pet fee incurred after purchasing a Labrador retriever in early 2021 for $1, 900.00. Def.'s Mot. Summ. J., Ex. 9, ECF No. 66. In addition to the purchase, the Debtor paid the breeder an additional $2, 080.00 to board the dog until he could take possession of it in May 2021. Id.

However, the Debtor's voluntary increases in expenses did not start upon his move to California. In June 2020, approximately 7 months before the end of his supervised release, the Debtor purchased a 2019 Ford Mustang. As part of the purchase, the Debtor made a $5, 000.00 down payment, and financed the balance through a 72-month automobile loan from Capital One Bank in the amount of $26, 835.31, with monthly payments of $467.82. Def.'s Mot. Summ. J., Ex. 18, ECF No. 66. After purchasing the Mustang, the Debtor not only timely made his scheduled monthly payments on the automobile loan, but also paid $14, 756.15 in extra principal payments in the 11-month period between the time of purchase and May 2021. Id.

Some of the Debtor's cost of living increases over time are reflective of his improved income during the same period. After his release, the Debtor found hourly employment as a valet eventually being promoted to a managerial position within the company. Due to his criminal record, the Debtor was hired in an independent contractor capacity "in case a client were to discover [his] criminal record." Debtor's Mot. Summ. J., Ex. A at ¶ 25-26, ECF No. 48. The Debtor had previously worked full-time for the D.C. government (Debtor's Mot. Summ. J., Ex. A at ¶ 29, ECF No. 48), however after six months in this position, the Debtor's criminal history resulted in his termination from the post. Id. at ¶ 30. The Debtor was unable to immediately secure a full-time position following his termination and relied on his independent contractor work and family support for income. Id. at ¶¶ 31-32.

When the Debtor filed his chapter 7 case he was working as an independent contractor commissioned sales representative in the software industry, Compl. at ¶ 30, ECF No. 1, and his own small business, Strategic Business Resources, LLC, which had contracts with two separate entities, Debtor's Reply in Supp. Mot. Summ. J. at 3, ECF No. 73. One of the LLC's contracts ended and was not renewed in February 2021, with the other still generating around $1, 500 per month as of the date of the summary judgment hearing. Id. In August 2020, the Debtor began full-time employment with the United States Small Business Administration (SBA) as a Loan Specialist. Debtor's Opp. Def.'s Mot. Summ. J., Ex. B at 14, ECF No. 72. Through all of his various forms of income, in 2020, the Debtor had a total income of at least $101, 051.76, and a total net income of at least $21, 561.36. Debtor's Mot. Summ. J. at ¶ 35, ECF No. 48.

Discussion

i. Summary Judgment Standard.

"A party may move for summary judgement, identifying each claim or defense on which summary judgment is sought." Fed R Civ. P. 56(a). Summary judgment is appropriate only if the Debtor can show "that there is no genuine dispute as to any material fact and [are] entitled to judgment as a matter of law." Id. A...