In re Mosley

• Citation: 494 F.3d 1320
• Decision Date: 09 August 2007
• Docket Number: No. 06-10349.,06-10349.
• Parties: In re Keldric Dante MOSLEY, Debtor. Educational Credit Management Corp., Plaintiff-Appellant, v. Keldric Dante Mosley, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

494 F.3d 1320

In re Keldric Dante MOSLEY, Debtor.

Educational Credit Management Corp., Plaintiff-Appellant, v. Keldric Dante Mosley, Defendant-Appellee.

No. 06-10349.

United States Court of Appeals, Eleventh Circuit.

August 9, 2007.

Julie K. Swedback, Educational Credit Management Corp., St. Paul, MN, Thomas W. Joyce, Jones, Cork & Miller, LLP, Macon, GA, for Plaintiff-Appellant.

Ashley Cummings (Court-Appointed), Hunton & Williams LLP, Atlanta, GA, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before EDMONDSON, Chief Judge, and TJOFLAT and JOHN R. GIBSON,^* Circuit Judges.

JOHN R. GIBSON, Circuit Judge:

Educational Credit Management Corporation ("Educational Credit") appeals from the district court's decision affirming the bankruptcy court's order discharging Keldric Dante Mosley's student loan debt on the basis of undue hardship. We affirm.

Mosley incurred several student loans while attending Alcorn State University, where he majored in history, between 1989 and 1994. At Alcorn State, Mosley joined the Army Reserve Officers' Training Corps. During his training in the summer of 1993, Mosley's hip and back were injured when he fell from a tank. Medical problems associated with his injury ultimately led him to resign his commission.

In the spring of 1994, Mosley left Alcorn State because it was not offering a class he needed to graduate and because he believed his mother's health was deteriorating. He lived with his mother in Atlanta, Georgia, from 1994 to 1999. During this time, Mosley had brief stints at several jobs, including jobs at Bruno's Supermarket, United Parcel Service, City Sanitation, and a moving company. He attempted to attend heavy equipment school to learn a trade, but he was unable to complete the training or keep any of his jobs because he was depressed, drank heavily, and experienced physical limitations from his injury. Mosley also attempted to go back to school but could not obtain financial aid because of the debts he had incurred to attend Alcorn State. He filed for Chapter 7 bankruptcy pro se in December of 1999 and obtained a discharge; the discharge did not include his student loans.

In 2000, Mosley's mother committed him to Georgia Regional Hospital, a state-supported mental health facility, where he stayed for approximately one to two weeks and was diagnosed with anxiety and depression. After his release, Mosley sought treatment for depression and chronic back pain at the Department of Veterans' Affairs. Veterans' Affairs placed him on prescription medication for depression, anxiety, back pain and swelling, and high blood pressure, which he continues to take but which makes him unable "to function."

Mosley is registered with the Georgia Department of Labor and has sought work through the labor pool since 2000 with little success. He worked at an airport for a short time but was unable to meet the physical demands of the job because his medication made him groggy and he cannot do heavy lifting. His monthly income consists primarily of disability benefits of $210 from the Veterans' Administration, and he relies on food stamps to survive. Mosley has been homeless since 2000 and frequently sleeps at his aunt's house. He has no car.

Mosley's student loans total approximately $45,000 and have been in default since 1996. He has not made any payments since then and, in 2004, filed a pro se motion to reopen his bankruptcy case and cease collection activities. The bankruptcy court granted the motion, and Mosley filed an adversary proceeding against USA Funds, the loan holder at the time, seeking discharge of his student loans on the basis of undue hardship. Mosley's loans were transferred to Educational Credit, which accepts title to certain federal student loan accounts on which the borrower has filed bankruptcy, and Educational Credit intervened and replaced USA Funds in the action.

Proceeding pro se, Mosley was the sole witness and testified before the bankruptcy court about his medical problems, work history, and living situation. He introduced Social Security and Medicare earnings statements showing that his annual taxable earnings between 1994 and 2004 have never exceeded $7,700 and have been as low as $1,287. The court also admitted a letter from an Emory University professor Dr. Angel Iglesias, on Veterans' Affairs letterhead stating that Mosley had been diagnosed with hypertension, depression, anxiety, and lower back pain but that x-rays did not show significant pathology. Educational Credit objected to several other doctors' letters that Mosley attempted to introduce, and the bankruptcy court reluctantly excluded them because they had not been properly authenticated. The bankruptcy court granted the discharge of Mosley's student loans even without these letters, however, reasoning that Mosley's testimony that he was in a vicious cycle of illness and homelessness that prevented him from working was credible and demonstrated that repayment would be an undue hardship. The bankruptcy court initially issued these findings orally and entered a short written order granting the discharge; about a month after the hearing, it issued and published a supplemental order restating its findings and rationale and citing the relevant case law. In re Mosley, 330 B.R. 832 (Bankr.D.Ga.2005).

Educational Credit appealed to the district court, arguing that Mosley failed to meet his burden because he failed to produce medical evidence to corroborate his testimony that his disabilities would prevent him from repaying his loans. It also moved to strike the supplemental order the bankruptcy court issued for publication after the appeal was filed. The district court denied the motion to strike, reasoning that the supplemental order did not alter any of the findings of fact or conclusions of law the bankruptcy court had reached orally in granting Mosley's discharge, but only elaborated on its rationale, and thus was not prejudicial to Educational Credit. The district court affirmed the discharge, summarily approving of the reasoning set forth in the bankruptcy court's supplemental order and concluding that Mosley produced sufficient evidence of his likely inability to repay the loans. Educational Credit appealed to this Court, arguing that Mosley failed to meet his burden of proof and that the bankruptcy court lacked jurisdiction to enter the supplemental order.

In this appeal from the district court's affirmance of the bankruptcy court's order, we review the bankruptcy court's decision. See Educ. Credit Mgmt. Corp. v. Frushour (In re Frushour), 433 F.3d 393, 398 (4th Cir.2005). Educational Credit challenges the bankruptcy court's conclusion that repayment of the student loans would impose an undue hardship on Mosley, which is a mixed question of law and fact. Id. We review the bankruptcy court's factual findings for clear error and its legal conclusions de novo. See Hemar Ins. Corp. of Am. v. Cox (In re Cox), 338 F.3d 1238, 1241 (11th Cir.2003).

The Bankruptcy Code provides that student loans generally are not to be discharged. 11 U.S.C. § 523(a)(8). A narrow exception is made, however, where "excepting such debt from discharge . . . will impose an undue hardship on the debtor and the debtor's dependents." Id. The Bankruptcy Code does not define "undue hardship," but this Circuit has joined several others in adopting the standard set forth in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395, 396 (2d Cir.1987). See In re Cox, 338 F.3d at 1241. To establish undue hardship, the Brunner standard requires the debtor to prove by a 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.

Brunner, 831 F.2d at 396.

Educational Credit does not contest that Mosley has satisfied the first requirement, an inability to maintain a minimal standard of living, as he lives below the poverty line and has for several years. It contends that the bankruptcy court improperly relaxed Mosley's evidentiary burden on the second and third requirements in light of his status as an impoverished pro se litigant. The bankruptcy court concluded that Mosley established undue hardship with his credible testimony that he has tried to obtain work but, for ten years, his "substantial physical and emotional ailments" have prevented him from holding a steady job. While the letter from Dr. Iglesias corroborates Mosley's testimony that he has been diagnosed with several illnesses, the court's conclusion that those illnesses are likely to impair Mosley's ability to repay his loans was based on Mosley's testimony. Citing several bankruptcy court cases and two Courts of Appeals cases, Educational Credit argues that corroborating medical evidence independent from the debtor's testimony is required to make the second Brunner showing where medical disabilities are the "additional circumstances" that make it unlikely the debtor will be able to repay his loans.

The Sixth Circuit recently rejected Educational Credit's position in Barrett v. Educational Credit Management Corp., 487 F.3d 353, 356 (6th Cir.2007). In Barrett, the bankruptcy court discharged the debtor's student loans after concluding that the debtor established undue hardship under Brunner because various medical conditions, particularly avascular necrosis, caused him severe pain that prevented him from working and made employers reluctant to hire him. Id. at 357-58. The bankruptcy court's conclusion was based largely on the debtor's testimony at the adversary proceeding, where the debtor also introduced...