Hastings v. U.S. Dep't of Educ. (In re Hastings)

643 B.R. 470

IN RE: Brian David HASTINGS, Debtor.

Brian David Hastings, Plaintiff,

v.U.S. Department of Education, Defendant.

Case No. 19-31372

Adv. No. 19-3078

United States Bankruptcy Court, S.D. Ohio, Western Division.

Signed February 3, 2022

Jade Smarda, Dayton, OH, for Defendant.

DECISION GRANTING DEFENDANT UNITED STATES DEPARTMENT OF EDUCATION'S MOTION FOR SUMMARY JUDGMENT

Guy R. Humphrey, United States Bankruptcy Judge

I. Introduction

The Bankruptcy Code permits most student loan debts to be discharged only if repayment of the debt "would impose an undue hardship on the debtor and the debtor's dependents[.]" 11 U.S.C. § 523(a)(8). The Debtor, Brian Hastings ("Hastings"), asks this court to discharge his student loans because he believes he cannot repay them while maintaining a suitable standard of living. However, the evidence presented at summary judgment, even when viewed in the light most favorable to Hastings, does not suggest that his circumstances meet the high bar set by the undue hardship standard as explicated by the courts.

II. Factual and Procedural Background

Hastings filed a bankruptcy petition under Chapter 7 on April 29, 2019. Subsequently, on August 5, 2019, he filed the present adversary proceeding against the U.S. Department of Education (the "DOE") seeking discharge of his student loans. After conducting discovery, the DOE filed a motion for summary judgment on November 30, 2021. Hastings did not submit a response brief.

Hastings is 59 years old. Doc. 34, Ex. 1 at 12. He is presently married and has two adult daughters. Id. at 12-14; 16. Hastings’ eldest daughter lives independently, but his younger daughter, age 20, lives at home and attends college while working on a part-time basis. Id. Hastings claimed his younger daughter as a dependent on his most recent tax return. Id. Hastings owns a home in Sidney, Ohio where he lives with his wife and younger daughter. Id. at 18. In 2005 he enrolled in a bachelor's degree program at Wright State University. After completing the program and obtaining the degree, Hastings began classes in the Master of Chemical Dependency Counseling program at the same institution but did not complete the program or obtain a master's degree. Id. at 19-21. It appears that he attended Wright State from approximately 2005 – 2016. Doc. 34, Ex. 2, ¶ 13. While a student, Hastings obtained a number of federal student loans that were held by the DOE at the time of filing. Id. at ¶¶ 14-18. Because one or more new loans originate each semester, Hastings had multiple student loans outstanding as of the petition date. He consolidated his student loans into two direct consolidation loans on May 31, 2020. Id. at ¶ 25; doc. 34, Ex. 1 at 186; Attach. 3. Hastings presently owes more than $275,000 on his student loans. Doc. 34, Ex. 2, ¶ 16.

Hastings is currently employed as a General Manager at Auglaize Erie Machine where he earns $25 per hour and works 45 hours per week. Doc. 34, Ex. 1 at 26-27. Prior to the COVID-19 pandemic, he received quarterly bonuses of $3,000 per quarter but has not been paid any bonuses since the start of the pandemic. Id. at 28. Before beginning his current position at Auglaize Erie Machine in 2017 or 2018, Hastings worked as a plant manager at Midwest Specialties and earned $30 per hour. Id. Hastings left his position at Midwest Specialties because he disliked changes in his job and felt that the requirement that he travel extensively for work would not be manageable. Id. at 30. His wife works on a part-time basis as a dining room manager at a pizza restaurant. (Debtor's Schedule I). Hastings’ younger daughter currently works as a part-time server at Red Lobster and studies at Ohio State University's Lima satellite campus. Id. at 18-19; 73. In the summer, she worked as a lifeguard. Id . at 81. She presently lives at home with her parents and uses her earnings to pay a portion of her college tuition, her car payment, and some of her own personal expenses. Id. at 83, 87-91, 113, 116-17. Hastings indicated that his daughter is saving money so she can begin living independently. Id. at 83-85. Hastings and his wife pay for their daughter's car insurance, gas, a portion of her college tuition, clothing and personal care items, and cellphone service. Id . at 87-90; 108-09; 112-13. They also provide her with a monthly allowance of $100, but it is unclear whether this is in addition to or inclusive of money for gas and clothing. (Debtor's Schedule J). His daughter has struggled with anxiety, depression, and other mental health issues for which she requires a service dog, medication, and counseling. Id . at 44-45 and 172; doc. 37, Ex. 1-D at 7.

In 2020 Hastings earned approximately $63,500. Doc. 37, Ex. 1-G at 28. Combined with his wife's income, his total reported household income equaled $83,243. Doc. 37, Ex. 1-V at 20. The standard repayment terms for Hastings’ student loans would require him to pay $1,838.45 per month for thirty years. Doc. 34, Ex. 2, ¶ 22. He is also eligible for an Income Driven Repayment REPAYE ("REPAYE") plan that would set his monthly payments at $419.19 for a 25-year term based on his 2020 adjusted gross income ("AGI") and family size. Id. at ¶ 36. The REPAYE plan payment would be subject to an annual reassessment of his household AGI and family size. Id. at ¶ 23.¹ The parties have communicated about Hastings’ options under the available IDR plans; however, he has indicated that he believes even the lowest payment available would require him to sell his house or significantly reduce other expenses. Doc. 34, Ex. 1 at 187-91.

Hastings did not begin making payments when his loans entered the repayment stage in 2016. Doc. 34, Attach. 3 at 85-91. From December 2018 to April 2019, Hastings made five payments of $5.00 each toward his student loan balance. Id. It is unclear from the record why he and his loan servicer agreed to this payment schedule, but it appears that the loan may have been in default. Doc. 37, Ex. 1-D at 11. In April 2019 Hastings’ federal tax refund was applied toward his student loan balance involuntarily. Doc. 34, Attach. 3 at 85-91.

III. Legal Standard and Analysis

A. Jurisdiction

This court exercises jurisdiction pursuant to 28 U.S.C. § 1334(b) and the standing order of reference in the District Court for the Southern District of Ohio, Amended General Order 05-02. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). This court has constitutional authority to enter final orders in this dischargeability adversary proceeding.

B. Summary Judgment Standard

A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (made applicable in this adversary proceeding by Federal Rule of Bankruptcy Procedure 7056 ). A factual disagreement is genuine if "a rational trier of fact could find in favor of either party on the issue." SPC Plastics Corp. v. Griffith (In re Structurlite Plastics Corp. ), 224 B.R. 27, 30 (B.A.P. 6th Cir. 1998) (citing Schaffer v. A.O. Smith Harvestore Prods., Inc. , 74 F.3d 722, 727 (6th Cir. 1996) ). A fact is material if it might affect the outcome of the suit under substantive law. Niecko v. Emro Mktg. Co. , 973 F.2d 1296, 1304 (6th Cir. 1992) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). When reviewing a motion for summary judgment, a court views all evidence and draws all inferences in the light most favorable to the nonmoving party.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

C. Student Loan Discharge in Bankruptcy

Student loans, as defined in § 523(a)(8)(A)-(B), are exempted from a debtor's standard discharge. See Barrett v. Educ. Credit Mgmt. Corp. (In re Barrett ), 487 F.3d 353, 358 (6th Cir. 2007). Instead, student loan discharge is governed by § 523(a)(8) and must be determined separately in an adversary proceeding. See Fed. R. Bankr. P. 4007(a) ; 7001(6). Section 523(a)(8) provides in relevant part:

(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—

* * *

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for—

(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or

(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual[.]

11 U.S.C. § 523(a)(8). Thus, student loans are dischargeable in bankruptcy only when the debtor can show that repayment of the loans would impose an undue hardship on the debtor and the debtor's dependents. In the Sixth Circuit, courts apply the three prong Brunner test to determine whether repayment would impose an undue hardship. Under this standard, the debtor must demonstrate:

(1) that the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living ... if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.

Oyler v. Educ. Credit Mgmt. Corp. (In re Oyler ), 397 F.3d 382, 385 (6th Cir. 2005) (quoting Brunner v. N.Y. State Higher Educ. Servs. Corp. , 831 F.2d 395, 396 (2d Cir. 1987) ). See also Nixon v. Key Educ. Res. (In re Nixon ), 453 B.R. 311, 326 (Bankr. S.D. Ohio 2011) (same). Because Hastings bears the burden of proving all three elements by a preponderance of the...