Consumer Bankruptcy Journal Summer 2017 - Page 27

In re Kearney (Kearney v. Navient Solutions, Inc., et al.), Adv. Case No. 16-3024 – Southern District of Ohio Western Division at Dayton By Brian Flick, Esq. The Dann Law Firm Cincinnati, Ohio Case Synopsis: O n July 14 th , 2017, Judge Humphrey of the United States Bankruptcy Court for the Southern District of Ohio Western Division at Dayton issued his Memorandum Opinion denying ECMC’s Motion for Summary Judgment as to the Debtor’s Adversary Complaint for dischargeability of her student loans under 11 U.S.C. 523(a)(8). In analyzing ECMC’s Motion for Summary Judgment and Debtor’s Memorandum in Opposition, the Court did conduct an analysis under Brunner v. New York State Higher Educ. Serv. Corp., 831 F.3d 395, 396 (2d Cir. 1987). As to the first Brunner prong – whether the repayment of student loans affects the debtor’s minimal standard of living – the Court found there were triable issues of fact as to whether the Debtor can maintain a minimal standard of living and repay her student loans. The Debtor’s student loans total $149,504.74. The Debtor is a 62 year old woman. The Debtor’s monthly net income is $2,443.42. The Debtor’s household income is $3,709.82 as her husband receives Social Security benefits of $1,266.40. On Schedule I/J of their petition the Debtor listed household expenses of $3,241.19. The required student loan payment is $1,150.00 monthly even thouhgh ECMC has stated there is a possibility the Debtor is eligible for an Income Contingency Repayment of $686.00 – a fact which both parties dispute. As to the second prong of Brunner, the Court agreed there are triable issues of fact with the certainty of hopelessness given the Debtor’s age and the ability to repay her student loans in the proposed ICR – which would end when she is 86. The Court then turns its focus to the third prong of Brunner – whether the Debtor made a good faith effort to repay her student loans. The Debtor based on her employment post-degree repaid her student loans timely by contacting her servicer and repaying via forbearance plans or interest-only agreements. As a result of almost 15 years of these repayment plans, the Debtor has not paid down any significant portion of the principal balance. The Court notes that the turning point for the third prong National Association of Consumer Bankruptcy Attorneys Summer 2017 of Brunner will rest upon the Court’s finding of whether the Debtor has maintained a minimal standard of living during her repayment period. This decision represents a victory for student loan borrowers of near- retirement age who may be able to argue that even under Brunner a finding of undue hardship rests upon the inability to repay their student loans once they reach a point of fixed income. There are still a variety of major issues regarding the applicability of an ICR under 20 U.S.C. 1087e(d)(1) and 34 C.F.R. 685.208, 34 C.F.R. 685.209 and 34 C.F.R. 685.220(b) as the Debtor has argued these loans, which consolidated Parent Plus loans in addition to FFELP loans, would be eligible for a second consolidation or ICR. CONSUMER BANKRUPTCY JOURNAL 27