In re Barrett

• Decision Date: 08 June 2007
• Docket Number: No. 06-3519.,06-3519.
• Citation: 487 F.3d 353
• Parties: In re Thomas Francis BARRETT, Jr., Debtor. Thomas Francis Barrett, Jr., Plaintiff-Appellee, v. Educational Credit Management Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

487 F.3d 353

In re Thomas Francis BARRETT, Jr., Debtor Thomas Francis Barrett, Jr., Plaintiff-Appellee, v. Educational Credit Management Corporation, Defendant-Appellant.

No. 06-3519.

United States Court of Appeals, Sixth Circuit.

Argued: April 20, 2007.

Decided and Filed: June 8, 2007.

ARGUED: Daniel S. Fisher, St. Paul, Minnesota, for Appellant. Robert A. Ciotola, Canfield, Ohio, for Appellee. ON BRIEF: Frederick S. Coombs III, Harrington, Hoppe & Mitchell, Youngstown, Ohio, for Appellant. Robert A. Ciotola, Canfield, Ohio, for Appellee.

Before: RYAN and GRIFFIN, Circuit Judges; HOOD, Chief District Judge.^*

OPINION

GRIFFIN, Circuit Judge.

Plaintiff-debtor Thomas Barrett filed a voluntary Chapter 7 bankruptcy petition on December 28, 2001, seeking the discharge of $302,342 in unsecured nonpriority debt. Among those claims are two student loans totaling $94,751. Defendant Educational Credit Management Corporation ("ECMC") appeals the judgment of the Sixth Circuit Bankruptcy Appellate Panel ("BAP"), 337 B.R. 896 (6th Cir. BAP 2006), affirming the bankruptcy court's order discharging Barrett's student loan debts on the basis of "undue hardship" pursuant to 11 U.S.C. § 523(a). ECMC argues that Barrett was required to provide corroborating evidence in the form of expert medical proof to establish that the circumstances underlying his inability to repay the loans will likely continue for a substantial portion of the repayment period. ECMC contends further that Barrett failed to establish that he has made a good faith effort to repay his loans in light of his decision not to participate in the Income Contingent Repayment Plan. For the reasons set forth below, we affirm.

I.

Plaintiff-debtor Thomas Barrett incurred student loan debt totaling $94,751 while earning masters degrees in both Health Administration and Business Administration from Saint Louis University in 1999. Barrett has a long history of medical problems.¹ After receiving his graduate degrees, Barrett was diagnosed with Hodgkin's disease in the summer of 2000. Oncologists at the Cleveland Clinic discovered compromised lymph nodes in Barrett's neck, abdomen, spleen, lungs, and liver, and Barrett was diagnosed as being at the "highest level" of Hodgkin's, stage IVB. He underwent intravenous chemotherapy treatment for over nine months, from August 2000 to April 2001. While Barrett received chemotherapy, his student loans became due. Barrett applied for, and received, an economic hardship deferment for his loans.² While Barrett was recovering from chemotherapy, he was too weak to work and was unable to earn any income. Due to accumulated medical bills, Barrett filed for Chapter 7 bankruptcy on December 28, 2001.

In October 2002, Barrett began experiencing pain in his shoulders. He was diagnosed with avascular necrosis, a condition that causes the patient's bones to die due to lack of blood supply. Barrett testified that he experiences "massive pain" in his shoulders, hips, and knees. He was originally prescribed OxyContin pain medication, and later underwent surgery in April 2004 to repair the joint in his right shoulder. Following the surgery, Barrett continued to experience "a great deal of pain" in his shoulder. After arthroscopic surgery revealed that the shoulder cap's prosthetic was loose, a second surgery on the right shoulder was performed in August 2004. Due to the second surgery, Barrett was forced to wear a sling on his right shoulder at the trial before the bankruptcy court.

Barrett testified that he now takes forty milligrams of OxyContin three times per day, ten milligrams of Oxycodon four times per day, and two milligrams of hydromorphone four times per day, and that the pain in his right shoulder is so great that he "can't even hold a coffee cup with [his] right hand." Following a nine-month recovery period for each surgery, Barrett expects to undergo surgery to repair his left shoulder and both hips.

Due to the pain that he experiences, Barrett's work opportunities are limited. Barrett testified that he currently performs "computer networking jobs" on a word-of-mouth basis that require no more physical exertion than the movement of a computer mouse with his left hand. Barrett testified that he has attempted to find a job with a company but has been unable to secure employment because he "cannot work at a level that would have to be sustained to work at a full-time job." Because of the pain that he experiences, Barrett's ability to work "really depends on how [he] feel[s] that day, and that can be very bad or it can be somewhat bad." Moreover, Barrett testified that, in his experience, employers were not willing to hire someone in his condition, stating "if I bring up what I've—what's happened to me in the past, it seemed like they lose interest." Barrett testified that because his medical condition has worsened since he filed the Chapter 7 petition, he has incurred an additional $20,000 in medical bills and expenses. According to Barrett's Schedule J, his projected monthly income is $868 and his projected monthly expenses total $3,575.³

On November 23, 2004, the bankruptcy court conducted an adversary proceeding. Barrett was the sole witness. In addition to testimony from Barrett, the bankruptcy court also admitted Barrett's tax returns for the years 2000, 2002, and 2003, Barrett's Schedules I and J listing his current expenditures, a February 14, 2003, letter from Dr. Brad Pohlman, a print-out of a search performed on the Department of Education's Interactive Repayment Calculator, and a copy of the 2004 HHC Poverty Guidelines as originally published in the Federal Register on February 13, 2004. On December 14, 2004, the bankruptcy court issued a memorandum opinion stating that it found Barrett's testimony to be credible and concluding that Barrett had demonstrated that it would be an undue hardship if his student loans were excepted from his Chapter 7 discharge. On appeal, the BAP unanimously affirmed the bankruptcy court's determination. ECMC now timely appeals.

II.

We focus our review of cases appealed from the BAP on the bankruptcy court's decision, reviewing findings of fact for clear error, and conclusions of law de novo. In re Tirch, 409 F.3d 677, 680 (6th Cir.2005). Whether the repayment of student loans would impose an undue hardship on the debtor is a question of law reviewed de novo. Id.; In re Cheesman, 25 F.3d 356, 359 (6th Cir.1994).

III.

The Bankruptcy Code limits the discharge of student loans only to those circumstances where repayment "will impose an undue hardship on the debtor and the debtor's dependents." 11 U.S.C. § 523(a)(8). As "undue hardship" is not defined in the Bankruptcy Code, we have joined most of our sister circuits in adopting the three-part Brunner test, named for the case in which it originated.⁴ Oyler v. Educ. Credit Mgmt. Corp., 397 F.3d 382, 385 (6th Cir.2005). The Brunner test requires the debtor to prove, by the preponderance of the evidence:

(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 v. New York State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2d Cir.1987)). To satisfy the second prong, Barrett must show that circumstances indicate a "certainty of hopelessness, not merely a present inability to fulfill financial commitment." Id. at 386 (quoting In re Roberson, 999 F.2d 1132, 1136 (7th Cir.1993)); see also In re Hornsby, 144 F.3d 433, 438 (6th Cir.1998) (observing that debtors "need not live in abject poverty before a discharge is forthcoming"). These circumstances may include, but are not limited to, "illness, disability, a lack of useable job skills, or the existence of a large number of dependents." Id. Ultimately, the most important factor in satisfying the second prong is that the "additional circumstances" must be "beyond the debtor's control, not borne of free choice." Id.

On appeal, ECMC does not challenge the bankruptcy court's finding that Barrett satisfied the first prong of the Brunner test: that Barrett cannot maintain, based on current income and expenses, a "minimal" standard of living if forced to repay the loans. Rather, ECMC argues that Barrett was required, and failed, to provide expert corroborating evidence to carry his burden of proof in satisfying the second prong. In particular, ECMC contends that Barrett could not competently testify to his prognosis or future health, and that expert medical evidence was necessary to competently project Barrett's future ability to repay his student loans.

In our prior interpretations of "undue hardship" under 11 U.S.C. § 523(a)(8), we have not declared that expert medical evidence is necessary to corroborate a claim of "additional circumstances" premised on the debtor's health. In Tirch, the most recent Sixth Circuit case to apply the Brunner test to § 523(a)(8), we held that a debtor's student loans are nondischargeable where the debtor fails to demonstrate how her physical condition prevented her from working. Tirch, 409 F.3d at 682.⁵ Despite ECMC's argument to the contrary, we did not hold that the debtor's claim was foreclosed by the lack of corroborating expert medical evidence. Rather, we emphasized repeatedly that the debtor's testimony by itself failed to meet the "undue hardship" standard. See id. at 681. In fact, we explicitly declined to consider whether expert corroboration was necessary to satisfy the second Brunner prong: "We have no occasion to delve into the BAP's holding that the bankruptcy court's assessment of the debtor's testimony regarding her mental and emotional health is sufficiently reliable to support the...