In re Ivory
| Citation | 269 BR 890 |
| Decision Date | 29 October 2001 |
| Docket Number | Bankruptcy No. 99-05996-BGC-7. Adversary No. 00-00014. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama |
| Parties | In re Tiffany IVORY, Debtor. Tiffany Ivory, Plaintiff, v. United States of America, United States Department of Education, Defendants. |
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Kenneth J. Lay, Birmingham, AL, for the plaintiff-debtor.
Leon F. Kelly, Assistant United States Attorney, Birmingham, AL, for defendant.
The debtor borrowed $2,500 in 1985 to attend a vocational school. She has not paid that loan and seeks to discharge it in the pending Chapter 7 case. Pursuant to section 523(a)(8) of the Bankruptcy Code, her loan is not dischargeable unless she can prove that paying the debt will impose an undue hardship on her and her dependents.1
The specific matter before the Court is the debtor's Complaint to Discharge Student Loan filed on January 18, 2000. A trial was held on May 15, 2001. The debtor and her attorney Kenneth J. Lay appeared, along with Leon F. Kelly, Assistant United States Attorney, for the defendants. The matter was submitted on the debtor's testimony, exhibits, stipulations, arguments, briefs, and the Court's records. With the defendants' consent, the debtor filed an affidavit on August 29, 2001, supplementing the trial record.
A student loan debt is not dischargeable in bankruptcy unless, "excepting such debt from discharge . . . will impose an undue hardship on the debtor and the debtor's dependents." 11 U.S.C. § 523(a)(8). Consequently, in proceedings to determine the dischargeability of a student loan, there are two issues: (1) is there a debt; and (2) if there is, would paying that debt impose an undue hardship on the debtor and the debtor's dependents.
The creditor opposing dischargeability of a student loan debt has the initial burden of proving the existence of the debt. The creditor must prove that there is a debt and that the debt is for an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution. If the creditor meets that burden, the burden shifts to the debtor to prove undue hardship.
In this case, because Ms. Ivory stipulated that she owes a student loan debt to the United States Department of Education (USDE), the defendants satisfied their burden.2 Therefore at trial, the burden shifted to the debtor to prove that paying the debt would impose an undue hardship on her and her dependents.
To determine whether payment of a student loan will impose an undue hardship on a debtor, this Court has adopted the three-part test from Brunner v. New York State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2nd Cir.1987). See Halverson v. Pennsylvania Higher Education Assistance Agency (In re Halverson), 189 B.R. 840, 844 (Bankr.N.D.Ala.1995); O'Flaherty v. Nellie Mae, Inc. (In re O'Flaherty), 204 B.R. 793, 796 (Bankr.N.D.Ala.1997); and In re White, 243 B.R. 498, 507 (Bankr. N.D.Ala.1999) reh'g denied 243 B.R. 515 (Bankr.N.D.Ala.1999).3
Under Brunner, the debtor must prove: (1) that she cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loan; (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 loan; and, (3) that she has made a good faith effort to repay the loan.
Ms. Ivory filed the pending Chapter 7 case on October 13, 1999. She filed the pending complaint on January 19, 2000.
Ms. Ivory received a $2,500 student loan in 1985 when she was 18 years old; she is now 34. With her student loan, Ms. Ivory enrolled in Barclay College to become a legal assistant. After attending the school for about three months, she took a leave of absence. According to Ms. Ivory, during that absence the school lost its accreditation and closed.4 Ms. Ivory did not complete her course of study anywhere else and has never worked as a legal assistant.
The USDE filed a claim in this case for $2,565.24 on May 9, 2000. It has been paid $767.96. And notwithstanding her complaint to determine dischargeability, Ms. Ivory did stipulate that she still owes a balance of $1,797.28.
Ms. Ivory is a single mother supporting a 15 year old son and twin, eight year old boys. Ms. Ivory testified that the older boy's father is, or was, in prison serving a seven-year sentence for violence committed against Ms. Ivory. She thinks the twins' father is in Sacramento, California.
Ms. Ivory does not receive child support from her children's fathers.5 She has attempted to collect child support from both fathers but has not been successful.6 She has applied for assistance from the Alabama Department of Human Resources, but as of the time of trial, she had not been contacted. She has discussed the matter with several private attorneys but explained that she cannot afford the about eleven hundred to fifteen hundred dollar retainer each requested or the hourly fees quoted. Ms. Ivory testified, "And if I had that money, I really don't think I would need child support." Transcript at 13.
All three children have health problems. The older son has had behavioral problems since he was about four or five. Ms. Ivory testified that this son's father was an extremely violent person and she attributes this child's problems to the turbulent domestic situation caused by that violence.
The twins were born three and a half months premature and weighed two pounds, three and a half ounces. Both have multiple health problems. Both have chronic reflux, asthma, and each uses a breathing machine. Their intestines were not fully developed at birth resulting in the intestinal reflux. They have heart problems, caused, according to Ms. Ivory, from the administration of an improper medication given for the intestinal reflux. They take medications daily and because of their breathing problems, receive daily "nebulizer treatments." Transcript at 22.
Because of their medical conditions, the twins receive a total of $960 per month in social security disability benefits.
Ms. Ivory's oldest son attends public school.
The twins attend Our Lady of Fatima, a private school. Half of their tuition is paid through the Alabama Scholarship Fund, a state supported assistance program designed for low income families. Ms. Ivory attempts to pay the other half, and the twins' after school daycare, from the twins' social security benefits.7
Attendance at a private school provides the twins with incalculable benefits. Because of their medical problems, the twins are considered special needs children at school. According to Ms. Ivory, that recognition entitles them to assistance that would not be provided by a public school. For example, because the twins' "nebulizer treatments" and medications must be administered while the twins are at school, placement in a private school allows for assistance with these tasks. In contrast, according to Ms. Ivory, the public schools require a parent or grandparent to come to the school to administer such treatments and medication. She testified that neither she nor her mother could do that on a daily basis.
Unfortunately, Ms. Ivory is in arrears on the twins' tuition payments. Consequently, the twins are in jeopardy of losing their scholarships. If they do, they (and Ms. Ivory), will lose the benefits described above.
Ms. Ivory also has medical problems, some similar to her twins'. Ms. Ivory has asthma and systemic lupus.
Ms. Ivory's breathing problems began when she was about fourteen. When she was pregnant with the twins, those problems became acute. She took prescribed medication, but the problems worsened. Ms. Ivory became more ill. While in the hospital, she saw a television commercial about the medication she was taking. She discussed the medication with her doctor, who determined that it indeed attributed to her breathing problems. According to Ms. Ivory, the medication may have been defective and may have caused some deaths.
Ms. Ivory discontinued the medication, but her lungs had already been damaged. About three months before the twins were due, Ms. Ivory had a severe asthma attack. That attack attributed to the twins' premature birth.
While the twins were in intensive care, they received the same breathing medication. Ms. Ivory eventually became a plaintiff in a class action against the medication's manufacturer. After an out-of-court settlement, Ms. Ivory received remuneration for herself and the twins. Her portion of the settlement was paid to the Chapter 7 trustee in this case. The trustee distributed those funds to unsecured creditors, including the USDE which received $767.96 on its $2,565.24 claim. The twins received their full settlement.
Ms. Ivory previously received social security disability benefits because of her own medical problems. However, because those payments were not sufficient and because she wanted to work, Ms. Ivory sought employment. When she found a job, she gave up the assistance. She explained, Transcript at 36.
Ms. Ivory is working now despite her health problems. Consequently, other than the school scholarships, the only public assistance she receives is the twins' $960 a month social security benefits; however, she is concerned. Considering her past and present circumstances, Ms. Ivory...
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Wright v. RBS Citizens Bank (In re Wright), Case No. 12-05206-TOM-7
...of specific items recognized by both subjective and objective criteria as basic necessities." Ivory v. United States Dep't of Educ. (In re Ivory), 269 B.R. 890, 899 (Bankr. N.D. Ala. 2001). Judge Cohen went on to list numerous basic necessities needed to maintain a minimal standard of livin......
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