In re Newman

• Decision Date: 03 January 2002
• Docket Number: Bankruptcy No. 00-30784F.,Adversary No. 01-0271.
• Citation: 304 B.R. 188
• Parties: In re Tawandalaia NEWMAN, Debtor. Tawandalaia Newman, Plaintiff, v. Education Credit Management Corp., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

304 B.R. 188

In re Tawandalaia NEWMAN, Debtor Tawandalaia Newman, Plaintiff, v. Education Credit Management Corp., Defendant.

Bankruptcy No. 00-30784F.

Adversary No. 01-0271.

United States District Court, E.D. Pennsylvania.

January 3, 2002.

COPYRIGHT MATERIAL OMITTED

Henry J. Sommer, Miller, Frank & Miller, Philadelphia, PA, for Debtor.

Arthur P. Liebersohn, Philadelphia, PA, trustee.

MEMORANDUM

BRUCE I. FOX, Chief Judge.

Presently before me are cross-motions for summary judgment.

Plaintiff Tawandalaia M. Newman filed an adversary proceeding seeking a determination that her student loan obligations to defendant Education Credit Management Corp. are dischargeable pursuant to 11 U.S.C. § 523(a)(8). The defendant submitted an answer in opposition and then filed a motion for summary judgment relying upon the plaintiff's answers to interrogatories and certain documents. The plaintiff countered with her own motion for summary judgment which relies primarily upon two affidavits.

For the following reasons, I conclude that neither motion may be granted because there remain material facts in dispute.

I.

The parties have submitted a joint pretrial statement pursuant to Local Bankr.Rule 7016-1 which sets forth the following undisputed facts:

Plaintiff Tawandalaia Newman and Defendant ECMC agree to the following facts:

1. Plaintiff currently owes $19,281.72 in federally secured student loans to the Educational Credit Management Corporation.

2. Plaintiff incurred these loans to attend Philadelphia College of Pharmacy and Science, located 600 South 43rd Street, Philadelphia, PA to pursue a degree in Pharmacology. Plaintiff did not complete this program.

3. Plaintiff s[sic] current total gross monthly income is approximately $1517.40, which consists of approximately $680 in earnings from the Insurance Society of Philadelphia, $558,40 in Supplemental Security Income Disability Benefits for her son DaiQuan Newman, and $279 in Food Stamps. This is below the federal poverty level set by the Department of Health and Human Services.

4. Plaintiff's housing expenses include $420 in mortgage payments, $25 for property taxes, approximately $30 for gas, $50 for electric, $45 for water, and $65 for telephone service. She spends approximately $600 per month on food, $150 on clothing, $60 on laundry and cleaning expenses, $160 for gas and tokens, $75 for medications and vitamins, $25 for haircuts, $100 for school supplies, toiletries and paper products, $17 for life insurance, and $75 for internet, cable and recreation expenses.

Approximately $100 in federal and state taxes each month are deducted from her paycheck. Plaintiff is eligible for the earned income tax credit, and any federal withholding would be returned to her, as part of her credit. She also pays about $60 per month in previous credit card bills.

5. Plaintiff's average expenses total $2057, and she is currently not making payments on her second mortgage with The Money Store.

6. Plaintiff has five children ages 4, 7, 9, 13 and 14. DaiQuan Newman, her seven-year-old, suffers from Denny's-Drash Syndrome and kidney failure. In 1999 he received a kidney transplant. As noted above, DaiQuan Newman receives Supplemental Security Income benefits.

7. Plaintiff currently receives food stamps in the amount of $279. As her income increases, this amount is reduced.

8. If her income, exclusive of DaiQuan Newman's Supplemental Security Income benefits, increases to $2249 per month, these SSI benefits will be reduced. These payments would terminate if Plaintiff's income grew to $3,363.80 per month.

9. If her income increases above the poverty level, her Medical Assistance benefits, which currently cover medical expenses for Plaintiff and four of her children, will be reduced.

10. Plaintiff faced foreclosure on her home in 1999 because she was in default on her mortgage payments. She took out a loan through the Homeowner's Emergency Mortgage Assistance Program (HEMAP) of the Pennsylvania Housing Finance Agency (PHFA) to prevent this foreclosure. Her mortgage payments to PHFA are included in her enumerated expenses above.

11. Once Plaintiff received a HEMAP loan, she was advised to file a chapter 7 bankruptcy to deal with her unsecured debts. Other than her student loans, she had over $14,000 in unsecured debts. At least one creditor had obtained a judgment against her.

12. Plaintiff's sister, Donja Seawell, is a co-owner of Plaintiff s[sic] home and a co-debtor on the mortgage with Fairbanks Capital. This house was deeded to Plaintiff and Ms. Seawell by their parents.

13. Plaintiff s[sic] ex-husband, Anthony Newman, is a co-debtor on the loan with the [sic] Money Store.

14. Plaintiff has not pursued her insurance license because she does not have the money to pay for the required continuing education credits.

15. Plaintiff has changed jobs several times to attempt to get jobs with better wages and benefits. When she was not working permanent, full-time positions, Plaintiff worked at temporary or part-time jobs. In order to return to full-time work, she would need to make appropriate child care arrangements for her four year-old, as well as after-school care for her seven and nine year-olds.

16. In the past ten years, Plaintiff has not earned more than $11.64 [sic], which she earned in a four-month temporary position at the Chester Post Office. Plaintiff did not obtain permanent employment at the post office after her temporary position was completed.

17. Plaintiff has been diagnosed with fibromyalgia.

18. Plaintiff applied for and received many deferments and forbearance periods for her student loans, and continually reapplied for these periods in an attempt to keep her loans out of default. Her income has not increased significantly since the time these deferments were granted. She has been told that she is not eligible for more deferments. She has not made payments since she worked at the Post Office.

Joint Pretrial Statement, Part II.

II.

A.

11 U.S.C. § 523(a)(8) provides:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt —

* * * * * *

8) for an educational benefit overpayment or 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, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents;

There is no dispute that the loan obligations held by the defendant in this proceeding are student loans which fall within the scope of section 523(a)(8). Accordingly, these obligations will not be dischargeable unless their repayment will impose "an undue hardship on the debtor and the debtor's dependents."

In In re Faish, 72 F.3d 298 (3d Cir.1995), cert. denied, 518 U.S. 1009, 116 S.Ct. 2532, 135 L.Ed.2d 1055 (1996), the Third Circuit Court of Appeals interpreted section 523(a)(8) and the phrase "undue hardship." The Circuit Court instructed that the tripartite test set forth in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2nd Cir.1987) (per curiam) should govern in this circuit as well. Under the Brunner interpretation of section 523(a)(8), a debtor demonstrates "undue hardship" only by demonstrating:

(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 for student loans; and (3) that the debtor has made good faith efforts to repay the loans.

In re Faish, 72 F.3d at 304-05.

Further, the Third Circuit explained that the debtor has the burden of persuasion on all three components of the undue hardship test and that all these elements must be proven for the student loan obligation to be rendered dischargeable:

Brunner now provides the definitive, exclusive authority that bankruptcy courts [in this circuit] must utilize to determine whether the "undue hardship" exception applies. Student-loan debtors have the burden of establishing each element of the Brunner test. All three elements must be satisfied individually before a discharge can be granted. If one of the requirements of the Brunner test is not met, the bankruptcy court's inquiry must end there, with a finding of no dischargeability.... Equitable concerns or other extraneous factors not contemplated by the Brunner framework may not be imported into the court's analysis to support a finding of dischargeability.

Id., 72 F.3d at 306.

The Third Circuit recently reaffirmed this interpretation of the phrase "undue hardship" used in section 523(a)(8) in In re Brightful, 267 F.3d 324 (3d Cir.2001).

B.

Federal Rule of Bankruptcy Procedure 7056 incorporates Fed.R.Civ.P. 56 into bankruptcy adversary proceedings. The purpose of summary judgment is to avoid the expense and delay of an unnecessary trial because no material facts are in dispute and one of parties is entitled to prevail on the merits. See, e.g., Goodman v Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). In general, the standard for entry of summary judgment under Rule 56 is well established. As the Third Circuit Court of Appeals explained:

Summary judgment is appropriate when the moving party is entitled to judgment as a matter of law and there is no genuine dispute of material fact.... In order to defeat "a properly supported summary judgment motion, the party opposing it must present sufficient evidence for a reasonable jury to find in its favor." Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir.1995) (citing Anderson v....