By: Nicholas Bonelli
St. John’s University School of Law
American Bankruptcy Institute Law Review Staff
Student loan debt is generally non-dischargeable in bankruptcy absent a showing of “undue hardship.”[1] In order to determine “undue hardship” under section 523(a)(8) of title 11 of the United States Code (the “Bankruptcy Code”), many courts employ the test set forth in Brunner v. New York State Higher Educ. Servs. Corp.[2] Under the Brunner test, a court will evaluate (1) whether a debtor can maintain a minimal standard of living if forced to repay, (2) whether their current state of affairs will persist, and (3) if the debtor has made good faith efforts to repay.[3] In In re Hutsell, a bankruptcy court in the Northern District of Ohio discharged the student loan of a plaintiff-debtor who faced a parade of health issues. The court determined Plaintiff-Debtor (“Hutsell”) passed the Brunner test, and deemed her parents’ voluntary payments for rent and medical supplies “noncompulsory charity from a third party.”[4] At the time of the decision, Hutsell was 47 years old and living alone in an apartment completely funded by her parents.[5] Sadly, she faced a constant barrage of medical complications, including Crohn’s disease, thyroid cancer, and a permanent ileostomy requiring the use of an ostomy bag.[6] Hutsell also faced employment challenges due to these infirmities, which limit the hours and type of employment she can feasibly maintain.[7] In 2007, Hutsell took out a student loan in pursuit of a two-year online certification, which, as of February 20, 2020, had a total remaining balance of $29,892.38.[8]
In considering the first prong of the Brunner test, the Hutsell court emphasized that half of Hutsell’s income “comes in the form of support from her parents.”[9] At the time of her discharge, Hutsell’s net monthly income was $2,562.83, but $1,366.33 of that income came from her parents.[10] Because this parental support was voluntary, the court determined “a debtor’s receipt of noncompulsory charity from a third party should generally be excluded when determining whether a debtor meets the first Brunner prong.”[11] The court excluded from its analysis the funds contributed by Hutsell’s parents, and based its determination on her remaining income. Hutsell’s income was “plainly not enough” to cover her basic expenses for rent and medical supplies, “let alone repay her student loans.” Therefore, Hutsell could not maintain a minimal standard of living if she were forced to repay her student loans.[12]
Under the second pong, the bankruptcy court utilized “a certainty of hopelessness” standard to determine whether the plaintiff-debtor’s circumstances were likely to persist.[13] Critically, these circumstances must be out of the debtor’s control. According to the court, complications from Hutsell’s litany of medical issues, mainly her unreliability due to “the constant need to attend to medical emergencies,” made the determination of “a certainty of hopelessness” apparent.[14] Hutsell was simply physically unable to work more than 40 hours per week.[15] The court found her extensive medical history and the limitations associated with these maladies were entirely outside of her control and created a state of “hopelessness.”[16]
The third and final prong of the Brunner test is the good faith efforts made by the debtor to repay her student loans. The court found that despite not making any repayments or attempting to participate in an alternative repayment program, Hutsell’s medical circumstances and her efforts to “maximize her income over the years by working as much as she physically [could],” demonstrated good faith.[17]
The court noted that “[t]he main reason Congress enacted § 523(a)(8) was to prevent debtors from taking on large amounts of student debt, reaping the economic benefits of their loans, and then immediately seeking to discharge the debt in bankruptcy.”[18] Furthermore, “it would be inequitable…to [discharge] a debtor who is able, but not willing, to independently maintain a minimal standard of living and repay h[er] loans but instead chooses to take advantage of the good nature and generosity of others.”[19] The court decided these “mischiefs” were plainly not present.[20] Hutsell neither chose to have Crohn’s disease nor the array of difficulties that accompany such a condition.[21] As a result, Hutsell’s discharge was warranted.
[1] See Hutsell v. Navient (In re Hutsell), Nos. 18-61474, 18-06038, 2020 Bankr. LEXIS 2204, at 8 (Bankr. N.D. Ohio Aug. 19, 2020).
[2] See Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987).
[3] See id.
[4] See In re Hutsell, at 4-10.
[5] See id. at 4.
[6] See id. (“Changing her ostomy bag is an ‘hour long process of showering, sanitizing, and reapplying [her] glue, stoma water and then new bag plus of course a complete change of clothes.’” [quoting Pl’s Resp. to Def’s Interrogs. Nos 3,8, ECF 32-1]). The same year Plaintiff was diagnosed with thyroid cancer, Hutsell’s husband left her. Id. at 4-5.
[7] See id. at 4 (“It has been challenging for Plaintiff to consistently hold a job and she has had to miss time from work due to illnesses.”). Hutsell faces further difficulties in the current health climate because she is immunocompromised.
[8] See id. Over a twenty-year period, her payments would approximately be $228 a month. Id. Furthermore, “[a]side from her student loans, [Hutsell] has no other outstanding debts.” Id.
[9] See id. at 10.
[10] See id. at 5. “Plaintiff’s parents voluntarily pay her rent, ostomy supplies, and auto insurance because of her medical issues and low income.” Id. at 10.
[11] Id. at 10.
[12] See id. at 11.
[13] Oyler v. Educ. Credit Mgmt. Corp. (In re Oyler), 397 F.3d 362, (6th Cir. 2005). In making this determination on the basis of a medical condition, courts have not required corroborating medical expert evidence before making a discharge. See Barrett v. Educ. Credit Mgmt. Corp. (In re Barrett), 487 F.3d 353, 360 (6th Cir. 2007). In the instant matter, “Plaintiff’s diagnosis of Crohn’s disease and thyroid cancer, and complications from same, are corroborated by a letter from her treating physician….” In re Hutsell at 16.
[14] See In re Hutsell at 16 (“Plaintiff’s medical issues, especially her struggles with Crohn’s disease, have largely prevented her from improving her economic lot in life.”).
[15] See id.
[16] See id. at 18.
[17] See id. at 21-22.
[18] Id. at 22.
[19] Id. at 10 n. 9.
[20] Id. at 10.
[21] See id. at 18.