Brunner v. New York State Higher Educ. Services Corp.

• Decision Date: 14 October 1987
• Docket Number: No. 41,D,41
• Citation: Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395 (2nd Cir. 1987)
• Parties: 42 Ed. Law Rep. 535, Bankr. L. Rep. P 72,025 Marie BRUNNER, Appellant, v. NEW YORK STATE HIGHER EDUCATION SERVICES CORP., Appellee. ocket 87-5013.
• Court: U.S. Court of Appeals — Second Circuit

Page 395

831 F.2d 395

42 Ed. Law Rep. 535, Bankr. L. Rep. P 72,025

Marie BRUNNER, Appellant, v. NEW YORK STATE HIGHER EDUCATION SERVICES CORP., Appellee.

No. 41, Docket 87-5013.

United States Court of Appeals Second Circuit.

Argued Sept. 22, 1987.

Decided Oct. 14, 1987.

Marie Brunner, pro se.

Frederick J. Schreyer, Albany, N.Y., for appellee.

Before LUMBARD, OAKES and KEARSE, Circuit Judges.

PER CURIAM:

Marie Brunner, pro se, appeals from a decision of the United States District Court for the Southern District of New York, Charles S. Haight, Judge, which held that it was error for the bankruptcy court to discharge her student loans based on "undue hardship," 46 B.R. 752 (Bankr.D.C.N.Y.1985). We affirm.

While this court is obliged to accept the bankruptcy court's undisturbed findings of fact unless they are clearly erroneous, it is not required to accept its conclusions as to the legal effect of those findings. Montco, Inc. v. Glatzer (In re Emergency Beacon Corp.), 665 F.2d 36, 40 (2d Cir.1981) (citing Queens Blvd. Wine & Liquor Corp. v. Blum, 503 F.2d 202 (2d Cir.1974); R.Bankr.P. 810 (current version, see R.Bankr.P. 8013); Bank of Pa. v. Adlman, 541 F.2d 999, 1005 (2d Cir.1976)). Whether not discharging Brunner's student loans would impose on her "undue hardship" under 11 U.S.C. Sec. 523(a)(8)(B) requires a conclusion regarding the legal effect of the bankruptcy court's findings as to her circumstances. Therefore, the bankruptcy court's conclusion of "undue hardship" properly was reviewed by the district court.

As noted by the district court, there is very little appellate authority on the definition of "undue hardship" in the context of 11 U.S.C. Sec. 523(a)(8)(B). Based on legislative history and the decisions of other district and bankruptcy courts, the district court adopted a standard for "undue hardship" requiring a three-part showing: (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; and (3) that the debtor has made good faith efforts to repay the loans. For the reasons set forth in the district court's order, we adopt this analysis. The first part of this test has been applied frequently as the minimum necessary to establish "undue hardship." See, e.g., Bryant v. Pennsylvania Higher Educ. Assistance Agency (In re Bryant), 72 B.R. 913, 915 (Bankr.E.D.Pa.1987); North Dakota State Bd. of Higher Educ. v. Frech (In re Frech), 62 B.R. 235 (Bankr.D.Minn.1986); Marion v. Pennsylvania Higher Educ. Assistance Agency (In re Marion), 61 B.R. 815 (Bankr.W.D.Pa.1986). Requiring such a showing comports with common sense as well.

The further showing required by part two of the test is also reasonable in light of the clear congressional intent exhibited in section 523(a)(8) to make the discharge of student loans more difficult than that of other nonexcepted debt. Predicting future income is, as the district court noted, problematic. Requiring evidence not only of current inability to pay but also of additional, exceptional...