Bukovics v. Navient (In re Bukovics)

• Decision Date: 25 February 2020
• Docket Number: Bankruptcy No. 15 BK 38069,Adversary No. 17 AP 00186
• Citation: 612 B.R. 174
• Parties: IN RE: Laurina Kim BUKOVICS, Debtor. Laurina Kim Bukovics, Plaintiff, v. Navient, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

612 B.R. 174

IN RE: Laurina Kim BUKOVICS, Debtor.

Laurina Kim Bukovics, Plaintiff,

v.Navient, Defendant.

Bankruptcy No. 15 BK 38069

Adversary No. 17 AP 00186

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed February 25, 2020

Entered February 27, 2020

William J. Barrett, Barack Ferrazzano Kirschbaum Nagelberg, Chicago, IL, for Plaintiff.

MEMORANDUM DECISION

Jack B. Schmetterer, United States Bankruptcy Judge

PREFACE

The crushing burden of student loan debt is proving to be a financial obstacle and a pervasive and concerning long-term reality for many people in the United States, Many individuals consider college degrees a necessity due to the large increases in earning potential they can offer.¹ However, over the past three decades, the cost of college attendance has seen drastic changes. In that time frame, the average tuition has soared by nearly 370% from around $4,885 to $23,091.²

This rising cost of tuition is leading to subsequent increases in borrowing and indebtedness for students. In 1992-1993, the average student loan debt for bachelor's degree graduates totaled $9,320.³ In 2017-2018, that average jumped to $29,812.⁴ With the ever-growing level of debt, three-fourths of students' families are now having to pay more than 20% of their annual income towards higher education.⁵ For low-income families making less than $16,000 per year, that percentage is 80%.⁶ In turn, the U.S. cumulative student debt load has ballooned to over $1.51 trillion at the end of 2019.⁷

Normally, relief from crushing debt can be sought through bankruptcy, which generally provides for a discharge of all debts.⁸ Indeed, the purpose of the discharge provided by the Bankruptcy Code is to provide honest, but unfortunate debtors with a financial, "fresh start."⁹ However, the Bankruptcy Code enumerates specific, limited circumstances in which certain debts are excluded from the general discharge.¹⁰ As originally enacted, student loans were dischargeable under the Code. Since then, the Code has been amended to include the exception to the student loan discharge.¹¹ Generally, all student loans are now excepted from discharge unless "undue hardship" can be demonstrated.¹² Under the standard adopted in this Circuit, debtors face an uphill battle for relief from their student loans through the difficult-to-meet Brunner test to determine "undue hardship."

INTRODUCTION

Plaintiff-debtor Laurina Kim Bukovics ("Plaintiff") brought this action seeking a declaration that her student loan debt owed to Educational Credit Management Corporation ("Defendant")¹³ is dischargeable under Section 523(a)(8) of Title 11 of the United States Code. Previously, Findings of Fact and Conclusions of Law were entered, and a Judgment Order was issued determining the debt non-dischargeable. Plaintiff then moved for relief from judgment on the basis of new evidence. Judgment was reopened and new evidence was presented.

For reasons articulated below, which constitute the Court's amended Findings of Fact and Conclusions of Law, it is held that Plaintiff has sufficiently met her burden to demonstrate that repayment of her student loan debt would constitute an "undue hardship" under 11 U.S.C. § 523(a)(8). A corresponding amended Judgment Order will be entered concurrently herewith discharging the student loan debt through her bankruptcy.

JURISDICTION

Subject matter jurisdiction lies under 28 U.S.C. § 1334. The district court may refer bankruptcy proceedings to a bankruptcy judge under 28 U.S.C. § 157 and 28 U.S.C. § 1334, and this proceeding was thereby referred here by Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Venue lies under 28 U.S.C. § 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). "A bankruptcy judge has constitutional authority to enter final judgment as to dischargeability." In re Monarrez , 588 B.R. 838, 845 (Bankr. N.D. III. 2018) (Barnes, T.); see also Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) (matters of nondischargeability stems from the bankruptcy itself).

FINDINGS OF FACT¹⁴

A. Plaintiff's History and Financial Circumstances

1. Plaintiff is an Illinois resident who was born in 1967.

2. In the fall of 1985, Debtor enrolled as a freshman at the University of Wisconsin.

3. In August of 1990, Plaintiff graduated with a degree in Communications from the University of Wisconsin.

4. During her time there, Plaintiff received thirteen separate student loans, consisting of nine Stafford Subsidized loans, two Federal Supplemental Loans for Students, and two Perkins Loans. At no point did Plaintiff take out any private student loans.

5. In November of 2008, Debtor's then employer, LandAmerica, ceased operating and filed for bankruptcy.

6. Plaintiff began receiving unemployment payments of $523 a week in late December of 2008.

7. In 2010, Plaintiff remained unemployed apart from two months of contract employment with Nielsen, during which she earned $8,232. Plaintiff's only other source of income was unemployment compensation, of which she received $534.00 per week during the most of 2010.

8. Plaintiff was unemployed during the entirety of 2011. At some point during 2011, Plaintiff's unemployment compensation ceased. Plaintiff had no other earnings in 2011.

9. Plaintiff began to receive some part-time contract work in mid-2012 as a contractor for Government Payment Service, Inc.

10. It was not until early 2013 that Plaintiff became regularly employed, this time as a marketing specialist at a salary of $31,097.

11. Plaintiff's employment continued until it was terminated on June 24, 2018. In return, Plaintiff received two weeks of severance pay.

12. In sum, as reported to her by the U.S. Social Security Administration, over her work life through 2017, Plaintiff had the following earnings (not including unemployment compensation, but including contract income in 2012 not appearing on the Social Security Administration report):

  1991     $19,317
                  1992     $9,007
                  1993     $11,633
                  1994     $26,105
                  1995     $19,793
                  1996     $29,850
                  1997     $43,166
                  1998     $44,500
                  1999     $48,500
                  2000     $58,000
                  2001     $37,643
                  2002     $45,596
                  2003     $44,738
                  2004     $13,090
                  2005     $4,170
                  2006     $46,264
                  2007     $75,543
                  2008     $88,357
                  2009     $1,755
                  2010     $8,232
                  2011     $-
                  2012     $27,125
                  2013     $31,097
                  2014     $43,824
                  2015     $58,342
                  2016     $57,908
                  2017     $63,036
                

13. Plaintiff has no investment income.

14. She received $20,000 as an inheritance in 2032, but does not expect to receive any additional money through any inheritance, will, trust, or estate plan.

B. Loans and Repayment History

15. Plaintiff's student loans, as originally received, totaled $20,896.00 and accrued interest at rates between 5% to 8%.

16. The required repayment period of Plaintiff's loans began on February 15, 1991.

17. From 1991 to 1997, Plaintiff made some payments on her loans, but record of payments made during that period no longer exist. At times during this period, the loans were put in forbearance and Plaintiff was excused from making payments.

18. Plaintiff defaulted on the two Perkins loans on March 2, 1992.

19. In April of 1997, Plaintiff applied to SallieMae, the then loan servicer, to consolidate all of her student loans into one. To be eligible for such a program, Plaintiff had to make three voluntary, consecutive, and timely loan payments.

20. On June 17, 1997, Plaintiff's application for consolidation of her loans was approved.

21. The consolidated principal of the loan balance at that time was $30,051.83 with interest accruing at a rate of 8%. Plaintiff was to make payments over 20 years with periodic increases in the monthly amount. The initial payments were set at $208.71.

22. For the period of July 31, 1997 through July 1999, Debtor applied for and received forbearance from the payments due on her student loan. No payments were made during this period, but interest continued to accrue and was capitalized to the loan balance.

23. As of July 14, 1998, the balance owed on the loan was $32,377.67.

24. As of January 25, 1999, the balance owed on the loan was $35,675.45.

25. From August 1999 through August 2000, Debtor made 13 consecutive monthly loan payments of $233.38 each.

26. From August 27, 2000 through August 2001, Debtor applied for and received forbearance from payments due on her student loan.

27. From September of 2001 through March of 2004, Debtor made 29 loan payments of $252.87 each (except that two of the payments were short by $4.83).

28. In June of 2004, Debtor made one payment of $255.

29. There is no record of forbearance or payment for the months of April and May of 2004.

30. On July 25, 2004, Debtor applied for and received forbearance from payments through January of 2005.

31. From March of 2005 through September of 2008, Debtor made 44 payments on her loan, ranging between $111.94 and $685.92, with an average payment of $360.

32. On November 30, 2008, due to her unemployment then, Debtor submitted a request to SallieMae for an Unemployment Deferment. While that request was pending, Plaintiff made two payments on her loan, a $400 payment on December 2, 2008 and a $373.90 payment on January 5, 2009.

33. As of January 5, 2009, Plaintiff had paid $28,346.76 on the consolidated student loan since June 17, 1997.

34. On January 23, 2009, Plaintiff inquired on the status of her request for Unemployment Deferment. SallieMae responded that Plaintiff needed to submit additional documentation supporting her request.

35. On February 1, 2009, Plaintiff's request for Unemployment Deferment was approved through May of 2009. During this period, Plaintiff made one payment of $30. Interest continued to accrue during the deferment period.

36. On June 12, 2009, SallieMae informed Plaintiff that her loan balance had reached $37,610.19.

37. By October 12, 2009, the loan balance had reached $38,541.05.

38. On February 8, 2010, Plaintiff

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