Opinion
No. 77-1473-BK-JE-B
April 2, 1978
Bankrupts — Debts Not Affected by Discharge — Student Loans — Hardship
A bankrupt's federally insured student loan is nondischargeable under 20 U.S.C. § 1087-3 where the bankrupt failed to show that repayment of the loan would impose an undue hardship on him since he had purchased a second car. Under 20 U.S.C. § 1087-3, federally insured student loans are only dischargeable after five years from the date repayment began or sooner if repayment would work an undue hardship.
Bankrupt's student loan became due some 2 1/2 years prior to his filing a petition in bankruptcy. Therefore, in order to discharge this debt bankrupt has claimed undue hardship because his gross weekly salary is $190, and after payroll deductions, payment of his required child support, and living expenses he has only $30 left weekly. From this he must make monthly payments of $88 on a car he has purchased since his bankruptcy while he owned a car already.
The court found that the bankrupt has been steadily employed, has additional income from the Air National Guard, a college degree and no mental or physical disabilities. In addition, he has no extraordinary financial burdens imposed on him by circumstances beyond his control.
In refusing to permit discharge the court noted that deferral of the privilege of seeking a discharge of student loans for five years after the loan first becomes due "recognizes that it typically takes a few years for the college graduate to achieve an income level that fairly reflects his earnings capacity." Further, the undue hardship exception to nondischargeability "is not intended to shelter the bankrupt from self-imposed hardship resulting from a reluctance to live within his means." Indeed, the court pointed out that if bankrupt can support the purchase of his car, "he can repay the money he borrowed for his higher education or can forego some other amenity until his income warrants it." See Sec. 17a [§ 523] at ¶ 9226.