Jean-Baptiste v. Educ. Credit Mgmt. Corp. (In re Jean-Baptiste)

• Decision Date: 23 February 2018
• Docket Number: Case No.: 8–13–72953–las,Adv. Pro. No.: 8–13–08129–las
• Citation: 584 B.R. 574
• Parties: IN RE: Natalie JEAN–BAPTISTE, Debtor. Natalie Jean–Baptiste, Plaintiff, v. Educational Credit Management Corporation; NCO Financial Services, Inc.; and Access Group, Inc., Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of New York

584 B.R. 574

IN RE: Natalie JEAN–BAPTISTE, Debtor.

Natalie Jean–Baptiste, Plaintiff,

v.Educational Credit Management Corporation; NCO Financial Services, Inc.; and Access Group, Inc., Defendants.

Case No.: 8–13–72953–las

Adv. Pro. No.: 8–13–08129–las

United States Bankruptcy Court, E.D. New York.

Signed February 23, 2018

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Louis A. Scarcella, United States Bankruptcy Judge

I. Introduction

In this adversary proceeding, pro se plaintiff Natalie Jean–Baptiste alleges that the loans held by defendant Access Group, Inc. ("Access")¹ are not "qualified educational loans" entitled to protection under 11 U.S.C. § 523(a)(8)² and thus are subject to discharge under § 727. If the Access loans upon which its claim arose are "qualified educational loans" entitled to protection under § 523(a)(8), then plaintiff argues, that repayment of the loans, i.e., excepting the loans from discharge, will impose an undue hardship on plaintiff. As to the latter, plaintiff contends that she meets the burden articulated by the Second Circuit in Brunner v. N.Y. Higher Educ. Servs. Corp. , 831 F.2d 395 (2d Cir. 1987), thus establishing that the student loans at issue are dischargeable.

Plaintiff has moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, made applicable by Bankruptcy Rule 7056 [dkt. 33]. Defendants Access and NCO Financial Services, Inc. have opposed that motion [dkt. 42], and plaintiff replied [dkt. 46]. The Court held a hearing on September 26, 2017 and requested supplemental briefing from the parties on the following issues: (1) whether the student loans held by Access are loans made under any program funded in whole or in part by a nonprofit institution such that the loans would be wholly excepted from discharge under § 523(a)(8)(A)(i), and (2) if not, what portion of such loans were certified by New York Law School as plaintiff's "costs of attendance" pursuant to 20 U.S.C. § 1087ll , such that some or all of the loan amounts may constitute qualified educational loans under § 523(a)(8)(B) [dkt. 60]. The Court received the parties' responsive submissions on November 20, 2017 [dkt. 67, 68]. The Court heard oral argument on January 23, 2018.

The Court has reviewed and carefully considered the parties' arguments and submissions. For the reasons discussed in this Memorandum Opinion and Order, the Court finds the loans held by Access to be educational loans made under a program funded in whole or in part by a nonprofit organization. Therefore, the loans at issue are wholly excepted from discharge under § 523(a)(8)(A)(i) unless plaintiff is able to demonstrate undue hardship. As to whether plaintiff's debt is nondischargeable based on the undue hardship exception, the Court finds that material issues of fact preclude summary judgment, and on that basis, the motion is denied.

II. Jurisdiction

The Court has jurisdiction over this matter under 28 U.S.C. § 1334(a) and (b) and the Standing Order of Reference entered by the United States District Court for the Eastern District of New York pursuant to 28 U.S.C. § 157(a), dated August 28, 1986, as amended by Order dated December 5, 2012, effective nunc pro tunc as of June 23, 2011. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) in which final orders or judgment may be entered by this Court pursuant to 28 U.S.C. § 157(b)(1).

III. Background³

A. Factual Background

Plaintiff is in her late thirties and an attorney licensed to practice law in the State of New York. She is single, and has no children or other dependents. At the time she filed her bankruptcy case, plaintiff lived with her parents. Plaintiff earned a Bachelor of Arts degree in Communications and Media from Fordham University in 2000 and a Juris Doctorate from New York Law School in February of 2004. From July 2011 to July 2012, plaintiff studied holistic health coaching at the Institute of Integrative Nutrition, where she finished the course requirements to be a holistic health coach but did not receive the certification due to an outstanding balance owed to the school. Plaintiff suffers from sickle-cell disease

. She also suffers complications of sickle-cell disease, including avascular necrosis in both hips and gallbladder disease.

Access is a non-profit corporation operating exclusively for charitable and educational purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, for the benefit of, to perform the functions of, or to carry out the purposes of post-secondary education institutions. Through the Access Group National Loan Program ("Access Loan Program"), Access offers both federally guaranteed and private, guaranteed education loans. Plaintiff applied and was approved for three "Law Access" loans between 2000 and 2002 (the "Access Loans"), one loan for each year she attended law school. The Access Loans are private loans originally financed by National City Bank ("National City") through the Access Loan Program. National City assigned the Access Loans to Access pursuant to a Commitment and Loan Sale Agreement, first entered into on April 1, 1998 and subsequently amended or restated from time to time, under which National City agreed that it would sell to Access student loans National City originated pursuant to the Access Loan Program. The Access Loans were originated, marketed, guaranteed, funded and subsequently purchased by Access. The application completed by plaintiff for each of the three Access Loans contains a statement whereby plaintiff acknowledges that the Access Loan Program is funded in part by nonprofit institutions. Access currently holds the Access Loans. Kentucky Higher Education Student Loan Corp. was the servicer until the Access Loans were declared in default, at which time defendant NCO Financial Services, Inc. became the servicer for the Access Loans.

After graduating from law school, plaintiff worked as a royalty label support analyst at EMI Music from July 2004 to June 2006 and as a paralegal at Warner Music Group from June 2006 through September 2006 in hopes of breaking into the entertainment law industry. From November 2006 to December 2009, she was the Director of Legal and Business Affairs for Renegade Nation, an independent multi-media company. During this time, to minimize expenses, plaintiff moved back home to live with her parents, and made efforts to increase the amount of her monthly student loan repayment.

Toward the end of 2009, plaintiff moved to Florida and took on work as a document review attorney. In late November 2009, plaintiff spent a week in a hospital in Florida due to severe lower back and hip pain.

While in Florida, plaintiff also took on various odd jobs in addition to her legal work. She was an independent beauty consultant for Mary Kay Cosmetics; a guest service captain for Miami Dolphins and University of Miami Hurricanes football games, concerts and special events held at Sun Life Stadium; an event coordinator for Bubblegum Event Planning; and for a brief period of time, a front desk receptionist for a health office. She also started her own business as a holistic health counselor in 2011. In 2012, plaintiff moved back to New York to live with her parents, and worked as a contract attorney for various temporary legal staffing agencies reviewing and analyzing documents.

In 2009, plaintiff had adjusted gross income of $69,539 and received a tax refund of $3,564. In 2010, plaintiff's adjusted gross income was $40,864 and she received a tax refund of $1,428. For 2011, her adjusted gross income was $34,653 and she received a tax refund of $927. In 2012, plaintiff's adjusted gross income was $23,930 and her tax refund was $1,912. For 2013, plaintiff's adjusted gross income was $59,638 and she received a tax refund of $2,097.

Plaintiff filed her chapter 7 petition on May 31, 2013. Her bankruptcy schedule I shows that at the time she commenced her bankruptcy case, she was employed as a contract attorney with Tower Legal Solutions with a monthly gross income of $4,277.20. Her net income after payroll deductions is listed as $2,929.55. She also lists $0.17 in interest. Thus, her total monthly income as set forth in Schedule I is $2,929.72. Her bankruptcy schedule J shows that she has $2,902 in monthly living expenses, including $400 for rent, $800 for food, $200 for clothing, $553 for transportation, $100 for medical and dental, $200 for recreation and entertainment, and $489 for vitamins, health and beauty aids and a gym membership. Plaintiff's monthly income exceeds her monthly expenses by $27.72.

Access does not dispute the facts in plaintiff's Local Rule 7056–1 Statement regarding her educational background and work history, or that she suffers from sickle cell disease

. Access does, however, take issue with certain facts alleged by plaintiff, and asserts that:

1. The aggregate balance on the three Access Loans as of September 23, 2014 total $50,164.03 ($19,175.01 with respect to the first Access Loan, $16,775.08 with respect to the second Access Loan, and $14,213.94 with respect to the third Access Loan), rather than $52,724.03 as alleged by plaintiff.

2. Disbursements on all the Access Loans were made payable to plaintiff, but the checks were not sent to plaintiff as plaintiff alleges but to New York Law School.

3. Although plaintiff claims to have no assets, schedule B to plaintiff's bankruptcy petition lists personal property with a self-assessed value of $5,764.13.

4. Although plaintiff states that her expenses are below those set forth in the National and Local Standards published by the U.S. Internal Revenue Service ("IRS"), Access contends that the expenses disclosed on plaintiff's schedule J to her bankruptcy petition exceed the IRS' National Standards for food, clothing and other items for the relevant period. Access observes that plaintiff listed food and clothing expenses of $1,000 per month, yet the IRS National Standards take from the

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