In re Dolph
| Decision Date | 29 January 1998 |
| Docket Number | BAP No. 97-8091. |
| Citation | 215 BR 832 |
| Parties | In re Ronald William DOLPH, Debtor. Ronald William DOLPH, Plaintiff-Appellee, v. PENNSYLVANIA HIGHER EDUCATION, ASSISTANCE AGENCY, Defendant-Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Sixth Circuit |
Frederick S. Coombs, III, argued and on brief, Harrington & Mitchell, Youngstown, OH, for Defendant-Appellant.
Robert A. Ciotola, argued and on brief, Canfield, OH, for Plaintiff-Appellee.
Before RHODES, STOSBERG, and WALDRON, Bankruptcy Appellate Panel Judges.
The bankruptcy court determined that the student loan obligation of the Debtor-Appellee, Ronald William Dolph, was dischargeable under the "undue hardship" provision of 11 U.S.C. § 523(a)(8)(B). The Panel vacates the order discharging the student loans and remands the case for required factual findings.
Although the general issue on appeal is whether the Debtor's student loans are dischargeable under 11 U.S.C. § 523(a)(8)(B), the more specific issue presented is whether the bankruptcy court, applying the test approved in Cheesman v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d 356 (6th Cir.1994), made sufficient factual findings to support its conclusions that the Debtor's circumstances are likely to persist for a significant portion of the repayment period and that the Debtor made a good faith effort to repay the loans.
The Bankruptcy Appellate Panel has jurisdiction over final orders of the bankruptcy court pursuant to 28 U.S.C. § 158(c)(1) and Order No. 97-27 entered by the United States District Court for the Northern District of Ohio on July 9, 1997, nunc pro tunc January 1, 1997. An order determining that a student loan is dischargeable under § 523(a)(8) is a final order for purposes of appeal. See, e.g., Cheesman, 25 F.3d 356.
Whether a student loan imposes an undue hardship for purposes of § 523(a)(8) is a question of law reviewed de novo. Cheesman, 25 F.3d at 359. However, findings of fact made regarding the circumstances surrounding the Debtor's failure to repay the student loans are reviewed under the clearly erroneous standard. In re Paolini, Case No. 95-3516, 1997 WL 476515 at *3 (6th Cir. Aug. 19, 1997)1; Brunner v. New York Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2nd Cir.1987).
Federal Rule of Bankruptcy Procedure 7052 makes Rule 52 of the Federal Rules of Civil Procedure applicable to adversary proceedings. Fed. R. Bankr.P. 7052. Rule 52(a) requires a bankruptcy court hearing an adversary proceeding to make findings of fact and conclusions of law. Id.
It is not necessary for the Bankruptcy Judge to prepare elaborate findings on every possible issue raised at trial. However, there must be findings, in such detail and exactness as the nature of the case permits, of subsidiary facts on which an ultimate conclusion can rationally be predicated. The findings should be explicit so as to give the appellate court a clear understanding of the basis of the trial court\'s decision, and to enable it to determine the grounds on which the trial court reached its decision.
Orlett v. Cincinnati Microwave, Inc., 954 F.2d 414, 418 (6th Cir.1992) (citations omitted). "Where facts which will support a judgment can be inferred from a trial court's other findings, an appellate court will deem that such inferences were drawn." Beal Bank, S.S.B. v. Jack's Marine, Inc., 201 B.R. 376, 381 (E.D.Pa.1996). However, where "the bankruptcy court's factual findings are silent or ambiguous as to an outcome determinative question," or where it is unclear how the bankruptcy court reached its conclusion such that the appellate court cannot provide an adequate review of the decision, the bankruptcy court's decision must be vacated and the case remanded for further factual determination. Hardin v. Caldwell (In re Caldwell), 851 F.2d 852, 857 (6th Cir.1988). See also In re 599 Consumer Electronics, Inc., 195 B.R. 244 (S.D.N.Y. 1996). An appellate court is limited to determining whether or not the record contains adequate findings by the bankruptcy court concerning determinative factual issues. Caldwell, 851 F.2d at 857-858.
Upon graduation from high school in 1983, Dolph enrolled in a university as a full time student. After several years, he transferred to a community college. Eventually, he transferred to another university, where he obtained bachelor degrees in marketing and management in May, 1990. Dolph's education was financed in part by the following student loans: $2,500 on November, 9, 1983; $2,500 on August 9, 1984; $2,500 on August 1, 1985; and $1,084 on February 5, 1987.
All of these loans were guaranteed by Pennsylvania Higher Education Assistance Agency (PHEAA). Dolph entered into a combined repayment plan. He was to repay the loans over 120 months, commencing April 1, 1991, at $109.48 per month.
After graduation from college, Dolph held a variety of jobs. He made the first 21 payments of $109.48 per month to PHEAA, through December, 1992. In August, 1991, Dolph was injured at work. Dolph testified that he was out of work approximately five years. During some of this time, Dolph received worker's compensation. He also received money from his parents in exchange for "helping them out" with their businesses. Dolph did not report the receipt of these funds as income on his tax returns. Commencing January, 1993, Dolph applied for and received three consecutive deferments on his obligations to PHEAA covering the period October, 1991 through April 5, 1996. Dolph repeatedly certified to PHEAA that he was "temporarily totally disabled" during the deferment period.
Once Dolph had received the maximum allotted worker's compensation benefits, he became employed. Dolph held at least four jobs from 1995 to 1996. In March, 1995, Dolph worked as a route salesman for a food delivery service, earning approximately $10,000 during the 20 weeks he was employed. In September, 1995, Dolph accepted an assistant manager position with a truck-washing company. Dolph left this company after his position was changed from salaried to hourly and he was not guaranteed any minimum hours. In February, 1996, Dolph became an assistant manager with a furniture rental store. However, he was laid off after only one week on the job.
Dolph testified that he then commenced an extensive job search throughout 1996 and eventually obtained a job with a car rental agency in November, 1996. There was conflicting testimony regarding whether Dolph attended a regional job fair on September 18, 1996, as part of his job search. PHEAA presented an expert witness at trial who testified that Dolph had not conducted an effective job search, and that Dolph could have found a better job if he had done an effective job search.
Dolph filed a petition under Chapter 7 on April 15, 1996. On October 17, 1996, Dolph filed an amended complaint against PHEAA seeking a determination that his student loans were dischargeable under 11 U.S.C. § 523(a)(8)(B). On July 31, 1997, the bankruptcy court entered its Memorandum Opinion and Order determining that the student loans were dischargeable under the "hardship exception."
Student loans are generally nondischargeable in bankruptcy. However, a student loan is dischargeable if the debtor qualifies under the "hardship exception." Section 523 provides:
A debtor seeking discharge of a student loan debt under § 523(a)(8)(B) bears the burden of proving that he qualifies for the "hardship discharge." Berthiaume v. Pennsylvania Higher Educ. Assistance Auth. (In re Berthiaume), 138 B.R. 516, 520 (Bkrtcy. W.D.Ky.1992). There are several tests for determining whether a debtor qualifies under § 523(a)(8)(B). Cheesman, 25 F.3d at 359. See also Brunner, 831 F.2d at 396; Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702, 704 (8th Cir.1981). In Cheesman, the Sixth Circuit did not adopt the Brunner test, and noted "the bankruptcy court did not state which test it used to determine that the Cheesmans' loans imposed an undue hardship." Cheesman, 25 F.3d at 359. The Sixth Circuit did, however, employ the Brunner test in determining Cheesman, but has not formally adopted any test for the determination of the dischargeability of student loans. See, e.g., Cheesman, 25 F.3d at 359; Paolini, Case No. 95-3516, 1997 WL 476515 (6th Cir. Aug. 19, 1997).
In the present case, the bankruptcy court used the Brunner analysis to determine that Dolph's student loan debt was dischargeable under § 523(a)(8)(B). The overwhelming majority of cases to consider the Brunner test have adopted its application. See, e.g., In re Roberson, 999 F.2d 1132 (7th Cir.1993); Queen v. Pennsylvania Higher Educ. Assistance Agency, 210 B.R. 677 (E.D.Pa.1997); Odom v. Columbia Univ., 906 F.Supp. 188 (S.D.N.Y.1995). The Brunner test considers not only the debtor's current ability to repay the loans, but also the likelihood that the debtor will have the ability to repay the loans in the future. Brunner, 831 F.2d at 396. It is clear that Congress intended to make discharge of a student loan more difficult to discharge than other types of debt, although not impossible. Congress enacted § 523(a)(8)(B) "to remedy an abuse by students who, immediately upon...
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