Pettaway v. Department of Education

Citation:
13-cv-2104 (unpublished)
Tag(s):
Ruling:
In a one paragraph, unpublished per curiam opinion the Fourth Circuit affirmed the decision of the district court for the Eastern District of Virginia upholding the bankruptcy court's denial of the Chapter 7 debtor's request for a hardship discharge of her student loan debt. In its decision, the Fourth Circuit adopted the findings and the reasoning of the district court's opinion, reported at 2013 WL 4062130.
Procedural context:
Appellant chapter 7 debtor brought an adversary proceeding seeking a hardship discharge of her student loan debt. After a bench trial the bankruptcy court rejected her claim and entered judgment in favor of the U.S. Department of Education. Appellant appealed and the district court affirmed. Appellant appealed. The Fourth Circuit affirmed.
Facts:
This summary is based on the facts and legal reasoning set forth in the district court's opinion that were adopted by the Fourth Circuit. The chapter 7 debtor filed an adversary proceeding seeking an undue hardship discharge of a student loan debt owed to the U.S. Department of Education. Following an automobile accident appellant had been unemployed since 2000, during which time she sought neither accommodation from her previous employer nor alternative employment. Appellant received SSDI and, until they were terminated for lack of documentation, long term disability benefits. She had also received several personal injury awards during the decade following her accident. These funds were clearly exempt from creditor process under both federal and state law. None was ever used to pay any of her student loan debts. The evidence showed, however, that the appellant gambled substantial amounts of money, making several trips to Atlantic City and other gambling destinations, almost monthly between July 2010 and January 2012. The bankruptcy court ruled against her and entered judgment in favor of the Department of Education, finding not only that, based on the medical evidence, she was not disabled but also that she had not made a good faith effort to repay the loan. The primary issue on appeal was whether the bankruptcy court improperly considered evidence as to how she spent exempt funds, i.e., gambling. The appellant argued that since the Department of Education could never have collected from those funds, she was free to spend the money however she pleased. The district court held that, given the record of her spending habits, it was not clear error for the bankruptcy court to find that appellant had not met her burden of proving either a good faith attempt to repay her student loans or an inability to maintain a minimal standard of living, regardless of whether the money was otherwise exempt from creditor process,
Judge(s):
Before MOTZ, Circuit Judge, and HAMILTON and DAVIS, Senior Circuit Judges.

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