Summary
reviewing lower court's application of facts to controlling legal test for clear error
Summary of this case from Claimants v. Ursa Operating Co. (In re Ursa Operating Co.)Opinion
Civil Action No. 00-500-KAJ
November 24, 2003
MEMORANDUM ORDER
This is a bankruptcy appeal challenging the granting of a hardship discharge from the debtor's obligations under a student loan. ( See D.L 6 at 5.) For the following reasons, the discharge order is affirmed.
In 1999, the debtor, Jean Gillens, filed a Chapter 7 bankruptcy petition and a complaint to discharge her student loan debt ( See D.I. 7 at A001-A005.) She had obtained student loans to finance her college education, and, in 1992, she had the loans consolidated through the appellant, Pennsylvania Higher Education Assistance Agency ("PHEAA" or the "Agency"). ( Id. at A002, ¶ 5.) At the time she filed the complaint, Ms. Gillens' student loan debt was alleged to be $24,953.33, plus interest accrued since October of 1998. ( Id.) She alleged that, due to a "change in her personal circumstances, which led to a substantially reduced income," she was unable to complete her studies and had not been able to put to use the college credit she had earned. ( Id. at ¶¶ 6-7.) More specifically, Ms. Gillens became a single parent and relocated to Delaware from Philadelphia, Pennsylvania, to be nearer to family support for her and her child and to reduce her cost of living. (D.I. 7 at A086-109.)
Docket Item 7 is the appendix submitted by PHEAA in support of its appeal and contains excerpts from the record in the bankruptcy court, including, among other things, the Complaint, the Answer, the Pretrial Stipulation, certain exhibits submitted at trial, and the trial transcript.
PHEAA answered and asserted that "[Ms. Gillens'] student loan obligation should not be discharged because [she] does not meet the standard of undue hardship. . . ." ( Id. at A008, ¶ 1.) It argued in the bankruptcy court and on appeal that the facts demonstrated by Ms. Gillens are insufficient to warrant discharge. ( See, e.g., D.I. 6 at 9-13.) The Agency sought an order declaring the student loan nondischargeable under 11 U.S.C. § 523(a)(8). ( Id. at A009.)
The case went to trial on November 1, 1999. After considering all the evidence and hearing the arguments of counsel, the bankruptcy court ruled that the debt is dischargeable. In particular, the court applied the three prong test which was first set forth by the Second Circuit in Brunner v. New York State Higher Education Sevices Corp., 831 F.2d 395, 396 (2d Cir. 1987), and was subsequently adopted by the Third Circuit in In re Faish, 72 F.3d 298, 304-05 (3d Cir. 1995), cert. denied sub nom., 518 U.S. 1009 (1996). ( See D.I. 7 at A137.) It found that the evidence clearly supported a finding that the debtor could not maintain a minimal standard of living for herself and her dependant child while repaying the student loan. ( Id.) It further found that the evidence demonstrated that the inability to repay the loan was likely to persist for a significant period of time. ( Id. at A137-38.) Finally, and again in light of the evidentiary record that had been developed before it, the court found that the debtor had indeed made good faith efforts to repay the loan but was simply unable to do so.
The law applied by the court is the test that all the parties agree is controlling. Although the Agency insists that it seeking de novo review of a legal determination by the bankruptcy court ( see D.I. 6 at 6), the question really boils down to whether the conclusions reached by the bankruptcy court are supported by the record. I have seen nothing in the arguments of counsel for the Agency to demonstrate that the court's findings are clearly erroneous. Cf. Krystal Cadillac-Oldmobile CMC Truck, Inc. v. General Motors Corp., 337 F.3d 314, 316 (3d Cir. 2003) (factual findings of bankruptcy court are reviewed on appeal for clear error; legal conclusions of bankruptcy court are subject to plenary review). Nor has the Agency demonstrated that the application of the law to the facts found by the court was anything but fully appropriate, given the record before it The Agency complains that the court did not make an appropriate financial analysis in determining the debtor's inability to pay the loan. That, however, does not appear to be the case. On the contrary, the court heard the evidence and was apparently persuaded by the detailed information provided to it supporting the assertion that the Brunner/Faish test had been met. The fact that the court did not accept the scenario proposed by the Agency for altering the debtor's life in an effort to achieve repayment does not mean that the court failed to consider the evidence and render an analytically justifiable result The debtor provided one analysis, the Agency another, and the court accepted the former rather than the latter. That result was supported by the evidence and will stand.
Accordingly, the decision of the bankruptcy court is hereby AFFIRMED.