Little v. U.S. Dep't of Educ. (In re Little), Case No.: 17-60127-RLJ-7

607 B.R. 853

IN RE: Walter Lee LITTLE and Linda Leticia Little, Debtors.

Walter Lee Little and Linda Leticia Little, Plaintiffs,

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

Case No.: 17-60127-RLJ-7

Adversary No. 17-06003

United States Bankruptcy Court, N.D. Texas, San Angelo Division.

Signed October 23, 2019

Filed October 24, 2019

Walter Lee Little, San Angelo, TX, pro se.

Linda Leticia Little, San Angelo, TX, pro se.

Donna K. Webb, U.S. Attorney Office, Dallas, TX, for Defendant.

MEMORANDUM OPINION

Robert L. Jones, United States Bankruptcy Judge

Walter and Linda Little, the debtors and the plaintiffs here, seek discharges, under 11 U.S.C. § 523(a)(8), of their collective student loan debts owed to the United States Department of Education (DOE). DOE moves for summary judgment on the basis that the Littles cannot meet the "undue hardship" requirements established in Brunner v. N.Y. State Higher Educ. Servs. Corp. , 831 F.2d 395 (2d Cir. 1987), applicable in this circuit by U.S. Dep't of Educ. v. Gerhardt (In re Gerhardt) , 348 F.3d 89 (5th Cir. 2003) ; and thus their complaint fails as a matter of law.

The Court has jurisdiction over this proceeding under 28 U.S.C. §§ 157 and 1334. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(I).

After reviewing the motion, the Littles' response, DOE's reply, the Littles' sur-reply, and the summary judgment evidence, the Court grants DOE's motion.

BACKGROUND

Mr. and Mrs. Little are husband and wife and are both 58 years old. Mr. Little currently does not work but receives disability payments; Mrs. Little works at Chick-Fil-A. They have no dependents. The Littles filed their joint chapter 7 bankruptcy petition on September 11, 2017.

Mr. Little first obtained a student loan to attend truck driving school in 1991. Exs. USAO 0011, lines 15–23; USAO 0091–0092. He obtained his commercial driving license but was unable to secure a truck driving job. Ex. USAO 0012, lines 3–25. This loan was paid-off in 1999 and is not subject of this matter. Mr. Little worked for AT&T from 1994 until he quit in 2008 because, he says, of union harassment. Ex. USAO 0013, lines 21–25. He worked odd jobs until 2011 when he was hired by Suddenlink. In 2014, Mr. Little left Suddenlink because he became bored with the job. Ex. USAO 0021, lines 11–17. He then worked in the insurance business until 2018. Exs. USAO 0021, lines 22–25; USAO 0023, lines 1–19.

Starting in 2006, Mr. Little took out several student loans to attend various community colleges, on and off, through 2016. Exs. USAO 0014, lines 16–23; USAO 0015, lines 17–20; USAO 0017, lines 3–25. Sometime in 2016, Mr. Little began experiencing health issues. Ex. USAO 0023, lines 24–25. He never received a degree from any of the community colleges. Exs. USAO 0015, lines 7–10; USAO 0016, lines 15–16; USAO 0017, lines 18–19; USAO 0018, lines 9–11. As of December 8, 2017, Mr. Little owes DOE $74,657.15, plus interest accruing from December 8, 2017 to date. Ex. USAO 0093.

Mrs. Little attended a community college for several years after graduating from high school but never received a degree. Ex. USAO 0146, lines 1–14. She worked for AT&T for 20 years, leaving in 2004. Exs. USAO 0147, lines 7–9; USAO 0148, lines 8–14. Starting in 2006, Mrs. Little began taking out student loans to attend various community colleges on and off until 2016. Ex. USAO 0151, lines 11–13. She never received a degree from any of the community colleges she attended. Ex. USAO 0152, lines 2–7. As of December 12, 2017, Mrs. Little owes DOE $68,918.03, plus interest accruing from that date until now. Ex. USAO 0193.

The Littles filed this adversary proceeding on December 11, 2017. They received their chapter 7 discharges on January 4, 2018. On June 21, 2019, DOE filed the Motion for Summary Judgment. In support of the Motion, DOE includes deposition testimony of the Littles and documentary evidence obtained during discovery. The Littles filed their response to the Motion on July 8, 2019. They rely on several documents: their bankruptcy schedules I and J, various medical documents, food stamp documentation (which they no longer receive), and public housing documentation. DOE filed its reply on July 22, 2019, arguing that the Littles' response fails to identify any disputed material fact on issues for which the Littles bear the burden of proof. The Littles filed their sur-reply on August 15, 2019, and included further documentation to support their case: a letter from DOE for an income-based repayment plan, a letter from the Social Security Administration regarding Mr. Little's disability benefits, and documentation of Mrs. Little's recent medical bill.

DISCUSSION

Summary judgment is appropriate where the record 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).¹ The initial burden is on the movant; where, like here, the nonmovant bears the burden of proof at trial, the movant must either point out the absence of evidence or undermine evidence of the nonmovant that is essential to one or more elements of the nonmovant's claim. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If successful, the burden then shifts to the nonmovant to establish a genuine issue as to a material fact. Id. at 324, 106 S.Ct. 2548. A genuine issue exists when, through evidence offered by the nonmovant, a rational fact finder could, at trial, find in favor of the nonmovant. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Moreover, not every disputed fact is material in light of the substantive law that governs the case. See id. This requires something more than conclusory allegations, improbable inferences, unsupported speculation, or metaphysical doubt. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Krim v. BancTexas Grp., Inc. , 989 F.2d 1435, 1449 (5th Cir. 1993). A court must draw all reasonable inferences in favor of the nonmovant. Pioneer Expl., L.L.C. v. Steadfast Ins. Co. , 767 F.3d 503, 511 (5th Cir. 2014).

Section 523(a)(8) of the Bankruptcy Code excludes "educational" loans from the discharge granted under § 727, "unless excepting such debt from discharge would impose an ‘undue hardship’ on the debtor and the debtor's dependents." Russ v. Tex. Guaranteed Student Loan Corp. (In re Russ) , 365 B.R. 640, 644 (Bankr. N.D. Tex. 2007). Traditionally, education loans were discharged along with other unsecured prepetition debts. Richard B. Keeton, Guaranteed to Work or It's Free!: The Evolution of Student Loan Discharge in Bankruptcy and the Ninth Circuit's Ruling in Hedlund v. Educational Resources Institute Inc., 89 AM. BANKR. L. J. 65, 74 (2015). Concern over student-loan-discharge abuse by newly graduated doctors and lawyers motivated Congress to pass the Education Amendments Act in 1976, which, absent "undue hardship," barred discharge of a federally guaranteed student loan obtained within five years of a bankruptcy filing. Id. at 75. Such provision became a part of the Bankruptcy Code with the Bankruptcy Reform Act of 1978. Id. Then, in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act incorporated all qualified educational loans—public and private—into this provision. Id. Student loans, as with the other eighteen exceptions to discharge in § 523(a), "reflect a conclusion on the part of Congress that the creditors' interest in recovering full payment of debts in these categories outweigh[s] the debtors' interest in a complete fresh start." Cohen v. de la Cruz , 523 U.S. 213, 222, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998) (quotation and citation omitted).

The courts' struggles with this provision stem from the Bankruptcy Code's failure to define "undue hardship." See, e.g., Brunner v. N.Y. State Higher Educ. Servs. Corp. (In re Brunner) , 46 B.R. 752, 753 (S.D.N.Y. 1985), aff'd , 831 F.2d 395 (2d Cir. 1987). The courts agree, however, that Congress intended something greater than "garden-variety hardship." Id. Various tests have thus been developed to gauge undue hardship, with most adopting the test from In re Brunner —the Fifth Circuit included. See Gerhardt , 348 F.3d at 91 ("Because the Second Circuit presented a workable approach to evaluating the ‘undue hardship’ determination, this court expressly adopts the Brunner test for purposes of evaluating a Section 523(a)(8) decision.").

The test from Brunner requires a three-part showing from the debtor :

(1) that the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for [himself] and [his] dependents 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.

Id. (quoting Brunner , 831 F.2d at 396 ). The test is conjunctive; a debtor's failure to satisfy any of the prongs means the debtor cannot establish that the student loans are an undue burden, and the student loans cannot be discharged. In re Teague , No. 16-03007, 2017 WL 187557, at *2 (Bankr. N.D. Tex. Jan. 17, 2017). The Brunner test "must be strictly construed," and "equitable concerns or other extraneous factors not contemplated by the test may not be imported into the analysis." In re Dorsey , No. 13-1047, 2015 WL 5992118, at *3 (Bankr. E.D. La. Oct. 13, 2015) (quoting In re Kuznicki , 483 B.R. 296, 300 (W.D. Pa. 2012) ). To do otherwise would go against Congress's intent to make student loan debt discharges available only in exceptional circumstances.

While many courts have observed that the Brunner test is harsh and at times too demanding, In re Turturo , 522 B.R. 419, 425–26 (Bankr. N.D.N.Y. 2014), the Fifth Circuit continues to follow this standard and has reaffirmed its adherence to the test...