Duncanson v. Bank of N.D. (In re Duncanson)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 6 months 1 week ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 25-6001 (8th Circuit, Aug 12,2025) Published
- Tag(s):
-
- Ruling:
- The United States Bankruptcy Appellate Panel for the Eighth Circuit affirmed a bankruptcy court's judgment that a debtor could discharge a $96k private student loan debt owed to the Bank/Appellant. Reviewing the bankruptcy court's factual findings for clear error and its application of the Eighth Circuit's totality-of-the-circumstances-test de novo, the bankruptcy court did not err in finding the private student loan to be an undue hardship pursuant to 11 U.S.C. § 523(a)(8) while concluding the Debtor could not discharge a second, $108k debt owed to the U.S. Department of Education.
- Procedural context:
- The Bankruptcy Appellate Panel's opinion explains (a) "t]he Eighth Circuit is an 'all or nothing' jurisdiction, meaning the [bankruptcy] court could not partially discharge portions of each loan. The bankruptcy court could, however, evaluate each loan and fully discharge one and not the other[;]" (b) a debtor need not introduce expert testimony concerning their mental health in a student loan dischargeability case, and a bankruptcy court may evaluate a debtor's testimony about their mental health (and the effects mental health challenges may have on a debtor's income and reasonable expenses) as part of the totality-of-the-circumstances analysis; (c) a court may consider the availability of income-based repayment plans offered (or not offered) by a student loan lender in the context of evaluating the totality of the circumstances; (d) a court may consider potential tax consequences of loan forgiveness in the context of evaluating the totality of the circumstances; and (e) in analyzing a debtor's "reasonably reliable future financial resources" and other relevant facts and circumstances, a court also may consider a debtor's age and remaining working years, physical condition, payment history on the student loan(s) at issue, prospects of receiving an inheritance, and retirement savings.
- Facts:
- Debtor/Appellee Rachel Duncanson filed a chapter 7 petition in July 2020 in the U.S. Bankruptcy Court for the Northern District of Iowa. She then filed an adversary proceeding in which she sought to discharge student loan debt she owed to the U.S. Department of Education ("DOE") and to Appellant Bank of North Dakota. The bankruptcy court held a trial in October 2022, and then stayed the case to allow the parties to try to negotiate a resolution. No settlement was reached, and the bankruptcy court held a supplemental evidentiary hearing in March 2024 "to update the status of the Debtor's income and expenses." Thereafter, the bankruptcy court issued a written opinion containing detailed findings of fact and applying the three-part totality-of-the-circumstances test applicable in the Eighth Circuit, under which a debtor bears the burden to prove undue hardship by a preponderance of the evidence based on "(1) the debtor's past, present, and reasonably reliable future financial resources; (2) a calculation of the debtor's and their dependent's reasonable necessary living expenses; and (3) any other relevant facts and circumstances surrounding each particular bankruptcy case." Applying facts to law, the bankruptcy court concluded Debtor could not discharge the $108,073.54 debt owed to DOE, which was incurred in connection with Debtor's education at Iowa State University where she obtained "a Bachelor of Arts degree in physics, education, and communication in 2000, after seven and a half years of study." However, the bankruptcy court held Debtor could discharge the $96,074.39 debt owed to Appellant, incurred in connection with Debtor's enrollment "in the engineering program at South Dakota State University [where she] earned her Bachelor of Science degree in mechanical engineering in 2010." Debtor moved for reconsideration of the bankruptcy court's determination that the DOE debt was not dischargeable, and the bankruptcy court denied her motion. Appellant took an appeal of the bankruptcy court's judgment against it to the Eighth Circuit's Bankruptcy Appellate Panel.
- Judge(s):
- Hasting, Surratt-States, and Jones
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