DEBTOR                                          CASE NO. 97-21914



DELBERT L. SPIECE                                    PLAINTIFF


VS.                                             ADV. NO. 98-2016



ASSISTANCE AUTHORITY                                    DEFENDANT





This matter is again before the Court on the parties’ Motions for Summary Judgment to resolve the question of whether or not the plaintiff should be discharged of his student loan debts to the defendant on the basis of undue hardship.  This proceeding has had a longer and more torturous history than it should have on account of the plaintiff’s difficulty in providing the Court with definitive information concerning his income and expenses.  The plaintiff has experienced several changes in his situation since he was last before the Court, most significantly having been divorced.  The Court will review the record and evaluate the most recent information he has provided. 

A debtor who files a complaint seeking to have a student loan obligation discharged on account of undue hardship must show by a preponderance of the evidence that he satisfies the test set out in Brunner v. New York State Higher Educ. Services, 831 F.2d 395 (2nd Cir. 1987):

(1) that the debtor cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her 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; (3) that the debtor has made a good faith effort to repay the loans.


At 396.  This test has not been specifically adopted in the Sixth Circuit, although it has been approved and employed.  See In re Cheesman, 25 F.3d 356 (6th Cir. 1994); In re Dolph, 215 B.R. 832 (6th Cir.BAP 1998).  The Bankruptcy Code does not define “undue hardship.”

Previously the plaintiff and defendant had submitted Joint Stipulations (Doc. # 18) stating that the plaintiff owed the defendant $19,449.72, plus costs and interest at the legal rate from December 31, 1996, pursuant to a Judgment entered in favor of the defendant in New Jersey based on the plaintiff’s default on six separate student loan promissory notes dating from 1990 to 1993.  The plaintiff has never made a payment to the defendant since the defendant acquired the notes.  The plaintiff’s initial payments on the student loans were through “Sallie Mae Servicing” and he believed that he made approximately seven payments on these loans prior to their assignment to the defendant.

They further stipulated that the plaintiff had not used the education he received in any of his employment.  He was married and supported his wife and four children.  He was grossing approximately $776.07 per week for a 70 hour week as an independent driver/carrier.  He had to supply his own transportation for this job.  He expended $409.26 per week for van payments, insurance and maintenance on the van, gas, and transportation.  He had to pay for rent, utilities, food, clothing and other necessities for himself and his family out of his net wages.  He had no medical or life insurance for himself or his family.  His wife and children, especially one child, were incurring ongoing medical expenses.      The plaintiff’s wife was mugged in December 1996, and suffered many serious injuries, including a back injury.  She had a claim pending for Social Security disability which if successful would result in her receiving $400-$600 per month.

In addition to these Joint Stipulations, the plaintiff had filed an Affidavit with his Motion for Summary Judgment (Doc. # 10) on June 4, 1998, which stated that his current take-home pay was $1,800.00 per month.  From this amount he stated that he paid monthly expenses of $364.00 for rent, $500.00 for food, $150.00 for clothing, $126.00 for gas and electric, $40.00 for water and sanitation, $70.00 for cable, $100.00 for medical expenses. $45.00 for telephone, $331.00 for van payment, and $40.00 for credit card indebtedness.  He stated that these expenses totaled $2,006.00 per month, an amount which exceeded his take-home pay.  In fact, they totaled $1766.00, a difference of $230.00. 

Since the plaintiff submitted this information for consideration, he has experienced changes in his situation, as referred to above.  On December 21, 1999, the plaintiff filed his verified Answers to Defendant’s Interrogatories and Requests for Production of Documents.  (Doc. # 33) This filing reveals that the plaintiff and his wife were divorced on September 20, 1999, having been married for less than two years.  As set out above, when this proceeding was first filed they were married, and she had filed for Social Security disability benefits on account of injuries received in a mugging incident.  Any award she received would have supplemented their income.  Now it is not a factor.  In addition, the four children referred to above are his former wife’s children, and he does not support them.  He does, however, now pay support for an 11 year old daughter who did not appear as a dependent on his schedules, his paternity apparently having been established after the filing of his petition.

The plaintiff lists his current gross income and expenses in his Answers to Interrogatories.  He states that he is a self-employed truck driver and that his gross monthly income is $2,619.50.  He lists the following expenses:

Rent                        $350.00

Electric                  140.00

Telephone                    60.00

Food                        400.00

Credit card debt               50.00

Child support            250.00

Auto payment            300.00

Transportation            100.00

Bush Trucking            400.00

Car insurance            200.00

Clothing                    75.00

Medical expenses      100.00

Work expenses            300.00



He shows the total as $2,665.00 which the record shows was taken from another compilation which the plaintiff filed on October 12, 1999, in which several items were different.  Apparently no one bothered to re-add the amounts set out above.

The defendant has argued that the plaintiff should not be discharged of his debt to it because he has not proved what his income is, pointing specifically to the plaintiff’s failure to submit copies of tax returns or, it alleges, any other documentary evidence.  As a self-employed person, the plaintiff is required to file quarterly estimated tax returns; however, there is no provision for taxes shown on his monthly expense itemization, nor is it figured into any other calculation of his expenses.  The Court would also note that the plaintiff does not show any expenditures for recreation, charitable giving, or anything else that does not constitute a basic necessity.

The tax return issue aside, the plaintiff has filed verified statements (his Affidavit and two sets of Answers to Interrogatories) in support of his Motion for Summary Judgment.  The plaintiff also filed copies of payment ledgers and receipts showing what his business income and expenses were at the inception of this proceeding.  These were attached to his first set of Answers to Interrogatories and Request for Production of Documents (Doc. # 13).  FRCP 56(e), made applicable in bankruptcy by FRBP 7056(e), provides that when a motion for summary judgment is supported by affidavits and “supplemented .... by depositions, answers to interrogatories, or further affidavits .... an adverse party may not rest upon the mere allegations or denials of the adverse party’s pleading, but the adverse party’s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.”  The plaintiff’s verified filings establish that his income is barely sufficient to allow him to pay his basic living expenses.  While the defendant has argued that the information provided by the plaintiff does not prove his case, it does not offer any specific facts to contradict the plaintiff.

The defendant did not contend earlier that the plaintiff had disposable income available out of what he alone earned.  Further, the defendant’s original argument concerning the plaintiff’s access to disposable income sufficient to make payments on his student loans hinged on the possibility of his former wife’s success in her disability claim.  Now that they are divorced, her income is of no consequence here.   However, even assuming the plaintiff has demonstrated that, based on his current income and expenses, he cannot maintain a minimal standard of living if forced to repay the student loans, he still must show that he meets the other two prongs of the Brunner test.

 The second prong, as set out above, is that the debtor must demonstrate that additional circumstances exist indicating that his inability to maintain a minimal standard of living is likely to persist for a significant portion of the repayment period of the student loans.  The plaintiff owes almost $20,000.00 plus interest calculated from December 1996 and costs.  The interest continues to accrue.  Even if the plaintiff could afford to pay $100.00 per month or more on this debt, it would take a significant period of time to pay it off.  There is nothing to indicate that the plaintiff has any prospects of doing better financially.  He has an associate’s degree in liberal arts from a community college, and spent less than one semester at another institution.  He is marginally better off than a person with a high school diploma.  The Court expects that this plaintiff will be scraping by well into the future, and certainly for the duration of whatever period it would take to pay off the student loans.

Finally, there is the question of whether this plaintiff made a good faith effort to repay these loans.  The parties have stipulated that the plaintiff made seven payments to “Sallie Mae Servicing” before the loans were assigned to the defendant.  He has not made any payments to the defendant, but he apparently did make an attempt to pay.  Further, he filed his Chapter 7 petition in November 1997, and therefore did not attempt to discharge the loans immediately after they became due.  In In re Dolph, 215 B.R. at 838, the panel discussed treatment of the good faith prong by the Sixth Circuit:

In Brunner, the court determined that the debtor had not made a good faith effort at repayment when she sought discharge of her student loans within a month of their becoming due and without even requesting a deferment of payment.  Brunner, 881 F.2d at 397.  In Cheesman, the Sixth Circuit noted that, unlike Brunner, the debtor did not seek discharge of the student loans shortly after they became due.  Cheesman, 25 F.3d at 360 (citing Brunner, 831 F.2d 397.)  The Sixth Circuit also noted that ‘[t]he Cheesmans made minimal payments on their loans several years after their loans became due and at least a year before filing for bankruptcy.’  Cheesman, 25 F.3d at 360.


The plaintiff therefore seems to meet the criteria set by the Sixth Circuit for finding that he made a good faith effort to repay.

In consideration of all of the foregoing, it is the opinion of this Court that the plaintiff has established by a preponderance of the evidence that it would be an undue hardship for him to be forced to repay his student loans, and that he is therefore entitled to summary judgment that they be discharged.  Further, the defendant’s Motion for Summary Judgment should be overruled.  An order in conformity with this opinion will be entered separately.


By the Court -


Judge William S. Howard

Copies to:

Sally J. Herald, Esq.

James M. McDonough, Esq.