Shaffer v. U.S. Department of Education (In re Shaffer)

Citation:
Shaffer v. U.S. Department of Education (In re Shaffer), Case No. 12-6010 (8th Cir. BAP October 30, 2012)
Tag(s):
Ruling:
Debtor met burden of proving by preponderance of evidence that educational loans were discharged on basis of undue hardship. Court employed "totality of circumstances" test (i.e., past present and future resources, reasonableness of living expenses, and other relevant facts, etc.). While court noted that each loan needed to be evaluated separately, this issue was not properly raised on appeal. Prior spending beyond means did not require the bankruptcy court to conclude that debtor could make future educational loan payments without undue hardship. Dropping out of school did not make debtor's situation self-inflicted as no certainty of future if debtor had graduated, and to do so would incurred yet more educational loan debt. Finally, expert testimony not required to prove mental health allegations of debtor.
Procedural context:
Appeal to BAP of bankruptcy court finding that educational loans were discharged.
Facts:
Debtor had obtained a BA over a course of study from 1994 to 2002. Debtor then enrolled in a chiropractic college in 2007, but dropped out fifteen months later without receiving a degree. Debtor owed $204,000 on educational loans. After leaving school, the debtor suffered from depression, held several jobs, took two medical leaves of absence, quit her job for fear she was going to be fired, then took temporary work, lived with a parent, cashed in her retirement, lived on disability, and accepted the charity of her family. At the time of trial debtor had just started a new job, but exact take home not known. Debtor’s expenses were calculated by BAP to exceed income by $100 to $200 per
Judge(s):
Kressel (Chief Judge), Schermer, and Nail.

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