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

625 B.R. 715

IN RE: Joseph James PROMISCO, Debtor.

Joseph James Promisco, Plaintiff,

v.United States Department of Education, Defendant.

Bankruptcy No. 19 BK 02949

Adversary No. 19 AP 00682

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed February 9, 2021

MEMORANDUM DECISION

Jack B. Schmetterer, United States Bankruptcy Judge

INTRODUCTION

Plaintiff-debtor Joseph James Promisco ("Plaintiff") seeks a determination following trial of this case that his student loan obligations to the United States Department of Education (the "Department of Education") are dischargeable as an undue hardship under Section 523(a)(8) of Title 11 of the United States Code.

For reasons stated herein, which constitute the Court's Findings of Fact and Conclusions of Law, it is held that Plaintiff has not met his burden to establish that repayment of his student loans would impose an undue hardship under 11 U.S.C. § 523(a)(8) as defined by this Circuit. A corresponding Judgment Order consistent with this decision shall be entered concurrently herewith.

JURISDICTION

Subject matter jurisdiction lies under 28 U.S.C. § 1334. The district court may refer bankruptcy proceedings to a bankruptcy judge under 28 U.S.C. § 157 and 28 U.S.C. § 1334, and this proceeding was thereby referred here by Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Venue lies under 28 U.S.C. § 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). "A bankruptcy judge has constitutional authority to enter final judgment as to dischargeability." In re Monarrez , 588 B.R. 838, 845 (Bankr. N.D. Ill. 2018) (Barnes, T.); see also Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) (matters of nondischargeability stems from the bankruptcy itself).

FINDINGS OF FACT¹

A. Plaintiff's History and Financial Circumstances

1. Plaintiff is indebted to the United States Department of Education on the following 17 loans made by the Department under the William D. Ford Federal Direct Loan Program under Title IV, Part D of the Higher Education Act of 1965, 20 U.S.C. 1087a et seq. (collectively, the "Department of Education Loans").

Disbursement Date	Disbursement Amount	Interest Rate
8/17/08	$1,765.00	6.00
8/17/08	$2,535.00	6.80
8/29/11	$6,500.00	6.80
9/20/12	$2,250.00	3.40
9/20/12	$1,000.00	6.80
2/22/13	$500.00	6.80
2/22/13	$3,250.00	3.40
8/17/13	$5,500.00	3.86
8/17/13	$7,000.00	3.86
8/20/14	$20,500.00	6.21
8/20/14	$31,720.00	7.21
8/19/15	$20,500.00	5.84
8/19/15	$32,110.00	6.84
8/17/16	$10,250.00	5.31
8/17/16	$16,026.00	6.31
1/4/17	$10,250.00	5.31
1/4/17	$16,026.00	6.31

2. The Department of Education calculates that, as of February 13, 2020, Plaintiff's total indebtedness on the Department of Education Loans was $244,231.60.

3. The Department of Education Loans are currently in administrative forbearance due to Plaintiff's bankruptcy.

4. Prior to filing his bankruptcy petition, Plaintiff applied for and participated in an income-driven repayment plan offered by the Department of Education, the Pay As You Earn ("PAYE") plan.

5. Plaintiff submitted his application for an income-driven repayment plan on March 16, 2018.

6. On or about March 21, 2018, the servicer of the Department of Education Loans notified Plaintiff that his monthly payment for the Department of Education Loans under the PAYE plan would be $0 beginning on April 21, 2018.

7. The monthly payment under a PAYE plan is 10% of a borrower's discretionary income, which is defined as the difference between the borrower's adjusted gross income and 150 percent of the U.S. Department of Health and Human Services Poverty Guideline amount for the borrower's family size and state – divided by 12.

8. Under PAYE, borrowers must recertify every year by providing their previous year's income which may lead to a change in payment if borrower's income has changed.

9. Plaintiff has made $0 in payments on the Department of Education Loans.

10. On March 29, 2017, Plaintiff, as part of a plea deal negotiated between the Illinois prosecution and Plaintiff's Illinois attorney, pled guilty to, and was convicted of, the crime under 720 ILCS 5/11-20.1(a)(6).

11. On March 29, 2017, the Circuit Court of Cook County, Illinois, accepted the negotiated plea deal and entered a sentencing order that sentenced Plaintiff to 24 months of probation and required him to register as a sex offender.

12. Plaintiff has appealed his Illinois conviction to the Illinois Appellate Court.

13. Based on the same alleged conduct underlying his conviction in Illinois, Plaintiff was extradited to California, the state of residence of the alleged victim.

14. In the Superior Court of the State of California, as part of the negotiated plea deal between the California prosecution and Plaintiff's California attorney, Plaintiff pled nolo contendere to, and was convicted of, the crime in violation of California Penal Code Section 288.2(a)(2).

15. Accepting the negotiated plea, the Superior Court of California sentenced Plaintiff to three years of imprisonment, but suspended the execution of the sentence, placing him on formal probation for a period of 5 years, and required him to register as a sex offender. Plaintiff was also required to complete a counseling program.

16. Plaintiff has retained an attorney to file a habeas petition challenging his California conviction. The initial cost of the attorney's retention was $5,000 and Plaintiff agreed to pay the attorney an additional $10,000 as a retainer to be paid monthly in installments of $2,500 commencing August 7, 2020. This fee does not include representation in a potential appeal if the petition is denied or criminal pre-trial/trial process if the petition is granted and the conviction and plea is vacated.

17. The alleged conduct underlying Plaintiff's conviction occurred in March 2016, while he was a student at DePaul University's law school.

18. Based on the same alleged incident underlying his criminal convictions, DePaul University permanently dismissed Plaintiff from its law school in October 2017 during his sixth semester in law school.

19. From October 16, 2018, to March 15, 2020, Plaintiff held a job as a Membership Assistant at Costco. This position was seasonal until January 2019 and was part time until September 2019 when he was promoted to full-time.

20. After being promoted to full-time, Plaintiff worked 38 hours per week and made $16 per hour for work performed on weekdays and Saturdays and $24 per hour for work performed on Sundays.

21. Plaintiff's total gross income in 2019 was $30,301.

22. Prior to March 15, 2020, the total amount of Plaintiff's average monthly expenses was $902, which was composed of $140 in utilities, $250 in food expenses, $40 in clothing expenses, $115 in medical and dental expenses, $235 in automobile fuel and maintenance expenses, $74 in automobile insurance, $4 in charitable giving, and $44 in miscellaneous other expenses.

23. From September 2019 to March 15, 2020, the total amount of Plaintiff's average monthly net income (without considering any tax refund) was $1,883, which was composed of $2,915 in gross income minus $590 in withholding and social security taxes, $147 for health, dental, and disability insurance, $291 for retirement plan contributions, and $4 for an employee fund.

24. Plaintiff's last day of work at Costco was March 15, 2020, and he was terminated by Costco effective March 25, 2020.

25. Plaintiff received unemployment benefits from March 15, 2020, to July 20, 2020, in the amount of $268 per week, minus a 14.9 percent tax withholding, from the Illinois Department of Employment Security.

26. From April 6, 2020, to July 20, 2020, Plaintiff received $600 per week in unemployment insurance, minus a 14.9 percent tax withholding, under the CARES Act.

27. In April 2020, the Illinois Department of Human Services approved Plaintiff's application for Supplemental Nutrition Assistance (SNAP) benefits and medical benefits under Medicaid. Plaintiff received $194 per month in SNAP benefits until his SNAP benefits terminated on August 1, 2020.

28. In July 2020, Plaintiff obtained full-time employment with Camping World as an Inventory Coordinator. In this position, he earns $18 per hour and works approximately 40 hours per week.

29. As of August, 2020, the total amount of Plaintiff's average monthly expenses (not including current legal fees) is $1,063, which is composed of $140 in utilities, $400 in food expenses, $40 in clothing expenses, $365 in automobile fuel, toll, and maintenance expenses, $74 in automobile insurance, and $44 in miscellaneous other expenses. Plaintiff anticipated monthly medical expenses of $130 per month starting in September 2020 when his health insurance becomes active to cover seeing a mental health provider which would make his total average monthly expenses $1,193 as of September 2020.

30. The total amount of Plaintiff's average monthly net income (without considering any tax refund) for August 2020 is $2,235, which is composed of $3,120 in gross income minus $573 in withholding and social security taxes and $312 in 401(k) plan contributions.

31. Starting September 2020, the total amount of Plaintiff's average monthly net income (without considering any tax refund) is anticipated to be $1,854, which is anticipated to be composed of $3,120 in gross income minus $573 in withholding and social security taxes, $312 in 401(k) plan contributions, and $381 for health, dental, accident, life, and disability insurance.

32. Plaintiff lives with family members—including his mother, his sister, his brother, his aunt, and his uncle—in a single-family home commonly known as 2000 N. 74th Avenue, Elmwood Park, Illinois 60707 (the "Property").

33. Plaintiff has resided at the Property since he was born.

34. Plaintiff has not made any payments toward rent or housing expenses since mid-2016, after he was arrested in May 2016.

35. The Property is currently encumbered by a mortgage in favor of Deutsche Bank National Trust Company, as trustee for Morgan Stanley

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