Michele D. Walker v Sallie Mae Servicing Corp., et al. (In re Michele D. Walker)
- Citation:
- No. 10-2032 (8th Cir., August 18, 2011)
- Tag(s):
-
- Ruling:
- Affirming the judgments of the BAP and Bankruptcy Court, the Eighth Circuit held that where a debtor's required monthly student loan repayment under the Income Contingency Payment Program (ICRP) would not allow the debtor to maintain a minimal standard of living, the loan is discharged under 523(a)(8). Applying the totality-of-circumstances analysis, the court held that repayment would constitute an undue hardship based on the status of the debtor at the time of the adversary proceeding, which was commenced several years after the general discharge, rather than looking back to the situation at the time of the bankruptcy. The court was troubled by the debtor's family vehicle payment and payments on a home improvement for a screened deck, which exceeded the amount the loan repayments would have been, but the improvident stipulation by appellant, Educational Credit Management Corporation, as to income and expenses, left the Court with no other choice, Because the debtor's household ran a substantial deficit (as per the stipulated amounts), even without the vehicle and screened porch payments, there would not be enough money to pay the full monthly required under the ICRP. Because the situation was not likely to change in the future, it would constitute an undue hardship to except the student loans from the debtor's discharge, and accordingly, the debtor was discharged from the obligation of repayment.
- Procedural context:
- The case was appealed by the defendant student loan organizations to the Eighth Circuit, appealing adverse decisions at both the BAP and the Bankruptcy Court.
- Facts:
- The debtor incurred substantial student loans in a failed attempt at medical school. The debtor tried other other professions and incurred additional student loans that were not included in the request for a finding of discharge. The special needs of the family did not allow the debtor to contribute to the family income in the foreseeable future. The appellant, Educational Credit Management Corporation (ECMC), stipulated to the income and expenses, which showed a significant deficit. The debtor's family was purchasing an expensive vehicle with a $850 monthly payment. They had also made a home improvements, for which they had a $375 monthly payment, $225 of which related to a screened deck. Even if the vehicle and screened porch loan payments did not exist, there would still not be enough to pay the full minimum payment under the ICRP (based on the stipulated budget), and it did not look like the prospects would improve.
- Judge(s):
- Wollman, Murphy, and Colloton, Wollman for the majority, Colloton concurring.
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