holding that "nothing in the Bankruptcy Code suggests that a debtor may choose to work only in the field in which he was trained, obtain a low-paying job, and then claim that it would be an undue hardship to repay his student loans"
How later courts described this case
- holding that "nothing in the Bankruptcy Code suggests that a debtor may choose to work only in the field in which he was trained, obtain a low-paying job, and then claim that it would be an undue hardship to repay his student loans"
- stating that “nothing in the Bankruptcy Code suggests that a debtor may choose to work only in the field in which he was trained, obtain a low-paying job, and then claim it would be an undue hardship to repay his student loans.”
- "proving that the debtor is currently in financial straits is not enough."
- stating that the debtor must prove “ ‘a total incapacity ... in the future to pay debts for reasons not within [her] control.’ ” (internal citations omitted)
Written by the judges who cited it.
The opinion
United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS October 23, 2003
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
_______________________ Clerk
No. 03-30040
_______________________
In the matter of: Jonathon R. Gerhardt,
Debtor.
United States Department of Education
Appellee
versus
Jonathon R. Gerhardt
Appellant.
Appeal from the United States District Court
For the Eastern District of Louisiana
Before REAVLEY, JONES and CLEMENT, Circuit Judges.
EDITH H. JONES, Circuit Judge:
Over a period of years, Jonathon Gerhardt obtained over
$77,000 in government-insured student loans to finance his
education at the University of Southern California, the Eastman
School of Music, the University of Rochester, and the New England
Conservatory of Music. Gerhardt is a professional cellist. He
subsequently defaulted on each loan owed to the United States
Government.
In 1999, Gerhardt filed for Chapter 7 bankruptcy and
thereafter filed an adversary proceeding seeking discharge of his
student loans pursuant to 11 U.S.C. § 523(a)(8). The bankruptcy
court discharged Gerhardt’s student loans as causing undue
hardship. On appeal, the district court reversed, holding that it
would not be an undue hardship for Gerhardt to repay his student
loans. Finding no error, we affirm the district court’s judgment.
I. STANDARD OF REVIEW
We review the decision of a district court, sitting as an
appellate court, by applying the same standards of review to the
bankruptcy court’s findings of fact and conclusions of law as
applied by the district court. In re Jack/Wade Drilling, Inc., 258
F.3d 385, 387 (5th Cir. 2001). Generally, a bankruptcy court’s
findings of fact are reviewed for clear error and conclusions of
law are reviewed de novo. Britton v. IBEW Local 520 (In re
Williams), 337 F.3d 504, 508 (5th Cir. 2003).
Whether courts review the “undue hardship” determination
de novo is a matter of first impression in this circuit. A number
of our sister circuits have confronted this precise issue,
determining that the dischargeability decision is a question of law
subject to de novo review. See In re Long, 322 F.3d 549, 553 (8th
Cir. 2003); In re Rifino, 245 F.3d 1083, 1086-87 (9th Cir. 2001);
In re Brightful, 267 F.3d 324, 327 (3d Cir. 2001); In re Hornsby,
144 F.3d 433, 436 (6th Cir. 1998); In re Woodstock, 45 F.3d 363,
367 (10th Cir. 1995); In re Roberson, 999 F.2d 1132, 1137 (7th Cir.
1993); Brunner v. New York State Higher Educ. Serv. Corp., 831 F.2d
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395, 396 (2d Cir. 1987). Similarly, this court has held that
determining dischargeability of a debt arising from a willful and
malicious injury under 11 U.S.C. § 523(a)(6) is a question of law
subject to de novo review. In re Williams, 337 F.3d at 508. The
decision to discharge Gerhardt’s debts represents a conclusion
regarding the legal effect of the bankruptcy court’s factual
findings as to his circumstances. Thus, the district court
correctly applied de novo review to the bankruptcy court’s
dischargeability holding, and this court applies the same standard
on appeal.
II. Undue Hardship Test
This circuit has not explicitly articulated the
appropriate test with which to evaluate the undue hardship
determination. The Second Circuit in Brunner crafted the most
widely-adopted test. See In re Cox, 338 F.3d 1238, 1241 (11th Cir.
2003); In re Ekenasi, 325 F.3d 541, 546 (4th Cir. 2003); Rifino,
245 F.3d at 1087-88; Brightful, 267 F.3d at 327-28; Roberson, 999
F.2d at 1135-36. To justify discharging the debtor’s student
loans, the Brunner test requires a three-part showing:
(1) that the debtor cannot maintain, based on current
income and expenses, a “minimal” standard of living for
[himself] and [his] 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. Brunner, 831 F.2d at
396.
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Because the Second Circuit presented a workable approach to
evaluating the “undue hardship” determination, this court expressly
adopts the Brunner test for purposes of evaluating a Section
523(a)(8) decision.1
A. Minimal Standard of Living
Under the first prong of the Brunner test, the bankruptcy
court determined that Gerhardt could not maintain a minimal
standard of living if forced to repay his student loans. Evidence
was produced at trial that Gerhardt earned $1,680.47 per month as
the principal cellist for the Louisiana Philharmonic Orchestra
(“LPO”), including a small amount of supplemental income earned as
a cello teacher for Tulane University. His monthly expenses, which
included a health club membership and internet access, averaged
$1,829.39. The bankruptcy court’s factual findings are not clearly
erroneous. Consequently, we agree with the bankruptcy court’s
conclusion of law, which we review de novo, that flows from these
factual findings. Given that Gerhardt’s monthly expenses exceed
his monthly income, he has no ability at the present time to
maintain a minimal standard of living if forced to repay his loans.
B. Persisting State of Affairs
The second prong of the Brunner test asks if “additional
circumstances exist indicating that this state of affairs is likely
1
Both the bankruptcy court and district court applied the
Brunner test to the facts of this case.
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to persist [for a significant period of time].” Brunner, 831 F.2d
at 396. “Additional circumstances” encompass “circumstances that
impacted on the debtor’s future earning potential but which [were]
either not present when the debtor[] applied for the loans or
[have] since been exacerbated.” In re Roach, 288 B.R. 437, 445
(Bankr. E.D. La. 2003). This second aspect of the test is meant to
be “a demanding requirement.” Brightful, 267 F.3d at 328. Thus,
proving that the debtor is “currently in financial straits” is not
enough. Id. Instead, the debtor must specifically prove “a total
incapacity. . . in the future to pay [his] debts for reasons not
within [his] control.”2 In re Faish, 72 F.3d 298, 307 (3d Cir.
1995) (quoting In re Rappaport, 16 B.R. 615, 617 (Bankr. D.N.J.
1981)).
Under the second prong of the test, the district court
correctly concluded that Gerhardt has not established persistent
undue hardship entitling him to discharge his student loans.
Gerhardt holds a masters degree in music from the New England
Conservatory of Music. He is about 43 years old, healthy, well-
educated, and has no dependents, yet has repaid only $755 of his
over $77,000 debt.3 During the LPO’s off-seasons, Gerhardt has
2
Some examples of “additional circumstances” include
“psychiatric problems, lack of usable job skills, and severely
limited education.” Roach, 288 B.R. at 445.
3
Our analysis of the second Brunner prong inevitably
overlaps to some degree with the third prong, which asks if the
debtor has made a good faith effort to repay the loan. Brunner,
831 F.2d at 396. However, because we resolve this case under the
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collected unemployment, but he has somehow managed to attend the
Colorado Music Festival. Although trial testimony tended to show
that Gerhardt would likely not obtain a position at a higher-paying
orchestra, he could obtain additional steady employment in a number
of different arenas. For instance, he could attempt to teach full-
time, obtain night-school teaching jobs, or even work as a music
store clerk.4 Thus, no reasons out of Gerhardt’s control exist
that perpetuate his inability to repay his student loans.
In addition, nothing in the Bankruptcy Code suggests that
a debtor may choose to work only in the field in which he was
trained, obtain a low-paying job, and then claim that it would be
an undue hardship to repay his student loans. See, e.g., In re
Grigas, 252 B.R. 866, 875 (Bankr. D.N.H.) (concluding that a debtor
could not satisfy the second Brunner prong when financial distress
was self-imposed). Under the facts presented by Gerhardt, it is
difficult to imagine a professional orchestra musician who would
not qualify for an undue hardship discharge. Accordingly, Gerhardt
“has failed to demonstrate the type of exceptional circumstances
that are necessary in order to meet [his] burden under the second
prong” of Brunner. Brightful, 267 F.3d at 330. Finding no error,
the judgment of the district court is AFFIRMED.
second prong, it is unnecessary to explore the third prong in
depth.
4
This is not meant to be an exhaustive list of possible
employment opportunities for Gerhardt, but instead merely seeks
to illustrate other viable avenues for income.
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