Certainty of Hopelessness that Judge Will See Reason

Posted by NCBRC - June 9, 2016

In a sanctimonious opinion divorced from reality, devoid of compassion, and logically flawed, a district court for the Middle District of Alabama found that the debtor failed to establish a “certainty of hopelessness” with respect to future ability to pay off her student loans and directed the bankruptcy court to find the debts nondischargeable. ECMC v. Acosta-Conniff, No. 15-220 (M.D. Ala. May 2, 2016).

Ms. Acosta-Conniff was a forty-four-year-old single mother of two teenagers who owed approximately $112,000.00 in student loans resulting from her acquisition of undergraduate and graduate degrees in chemistry and special education. She had steady employment as a special education teacher until health problems, including adult-onset diabetes and morbid obesity, compelled her to change to a less strenuous teaching position. She was in the top tier of the public school pay scale and did not expect to earn significantly more in the future despite receiving periodic pay increases. Though she sought higher paying jobs within her school district, her efforts were unsuccessful, and she testified that employment outside her school system would likely result in loss of seniority. She had paid $9,000 toward the loans but, at the time of bankruptcy, the loans had been in deferred status for many years. She had not applied for an income-contingent repayment plan. Her bankruptcy schedules revealed negative income of $33.33.

The bankruptcy court determined that her monthly payment on the student loans would be $915 for fifteen years and found that repaying the loans would cause Ms. Acosta-Conniff undue hardship. Based on her testimony and the court’s own familiarity with the Alabama public school system, the bankruptcy court concluded that Ms. Acosta-Conniff’s employment income was unlikely to significantly improve, and, furthermore, that the emancipation of her children would be offset by the cessation of child support payments. The court discharged the debt under section 523(a)(8) and ECMC appealed to the district court.

Faced with the issue of student loan hardship discharge, the Eleventh Circuit applies the three-part Brunner test (Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d. Cir. 1987)), under which a debtor must demonstrate “(1) that [he or she] cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.”

On appeal, the district court emphasized that section 523(a)(8) was intended to make it difficult for debtors to discharge student loans in light of perceived abuse by students who sought discharge soon after graduation. The court was guided by the case of Hemar Ins. Corp. of Am. v. Cox (In re Cox), 338 F.3d 1238 (11th Cir. 2003), where the Eleventh Circuit noted that “[t]he government is not twisting the arms of potential students. The decision of whether to borrow for a college education lies with the individual; absent an expression to the contrary, the government does not guarantee the student’s future financial success. If the leveraged investment of an education does not generate the return the borrower anticipated, the student, not the taxpayers, must accept the consequences of the decision to borrow.”

The court noted that the bankruptcy court’s factual findings did not include an analysis of the reasonability Ms. Conniff’s expenses (specifically noting that the necessity of her payments into her retirement plan and her payments for cable television was not addressed). Nor did the bankruptcy court take into consideration that under an IBRP, Ms. Conniff’s repayment schedule would be $346.00 for 120 months.

The case turned, however, on the Brunner element under which the debtor must establish “additional circumstances . . . indicating that this state of affairs in likely to persist for a significant portion of the repayment period of the student loans.” In applying that prong of Brunner, the Eleventh Circuit has adopted the nearly insurmountable “certainty of hopelessness” test in which the debtor must show total incapacity, for reasons out of her control, to repay the debt in the future.

Unsurprisingly, the court found that Ms. Acosta-Conniff failed to meet this test. It based its conclusion on the following factual findings. 1) Ms. Acosta-Conniff chose to pursue advanced degrees even though the school system in which she worked did not adequately compensate teachers with that level of education, 2) protecting her tenure by not moving to a different system was her choice, 3) her testimony, without documentation to back it up, that she spends approximately $750.00 per month on her two children, ages 14 and 16, and receives $500.00 in child support, was insufficient evidence that the emancipation of her children would not result in a significant increase income, 4) her ability to take on additional part-time work that is currently financially impractical due to the concurrent increase in child care expenses would become practical once her children are emancipated, 5) though she has been unsuccessful in obtaining higher paying employment in her school district despite her qualifications, there is no reason she could not be more successful in the future.

[That the court was partially persuaded by the fact that Ms. Acosta-Conniff voluntarily took out the loans despite low pay cap for teachers injects an element of censure having nothing to do with whether the circumstances rendering her unable to pay are likely to continue. Moreover, that same condemnation would apply to the lender who makes free with loans to people pursuing non-lucrative careers.]

The court compared this case to the case of Educ. Credit Mgmt. Corp. v. Mosley (In re Mosley), 494 F.3d 1320 (11th Cir. 2007), where Mr. Mosely suffered an accident causing him to be unable to graduate or perform manual labor. He subsequently suffered a mental breakdown, was prescribed drugs that severely limited his ability to function, became homeless and survived on food stamps and disability.

Treating Mosley as the apparent standard for certainty of hopelessness, the district court found Ms. Acosta-Conniff’s circumstances insufficiently horrendous. The court concluded: “Although Conniff admittedly finds herself in undesirable financial difficulties, she ultimately must bear the consequences of her decision to obtain loans in order to pursue her multiple educational goals.”

Ms. Acosta-Conniff filed a notice of appeal to the Eleventh Circuit, No. 16-12884.

Acosta-Conniff MD Ala opinion May 2016


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