Amicus Curiae Brief — Thelma G. McCoy, Petitioner v. United States

No. 20-886

IN THE

Supreme Court of the United States

THELMA G. MCCOY,

v.

UNITED STATES OF AMERICA,

Petitioner,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF OF AMICUS CURIAE

CENTER FOR RESPONSIBLE LENDING

IN SUPPORT OF PETITIONER

WILLIAM R. CORBETT

Counsel of Record

YVETTE GARCIA MISSRI

CENTER FOR RESPONSIBLE LENDING

302 W. Main Street

Durham, NC 27701

(919) 313-8544

Will.corbett@responsiblelending.org

February 3, 2021

BATEMAN & SLADE, INC.

STONEHAM, MASSACHUSETTS

TABLE OF CONTENTS

TABLE OF AUTHORITIES ..................................... iii

INTERESTS OF AMICUS CURIAE ..........................1

SUMMARY OF ARGUMENT.....................................1

ARGUMENT ...............................................................3

I.

There is a persistent circuit split

on the proper test for “undue

hardship” and the Brunner test

is flawed. ................................................3

A.

The circuit split over the

proper test for “undue

hardship” is long-standing..........5

B.

Brunner tests too much

and has generated

subsidiary splits. .........................6

C.

II.

These splits expose debtors

to materially different law

and outcomes between

jurisdictions. ................................9

People of color and low-income

debtors are burdened more

heavily by Brunner’s restrictive

approach. ..............................................11

A.

Student debt weighs more

heavily on borrowers of

color and exacerbates the

racial wealth gap. ......................11

B.

Brunner and its sub-tests

disproportionately burden

debtors of color. .........................14

i

III.

A totality-of-the-circumstances

test comports with the text and

purpose of the Bankruptcy Code

and would better serve lowincome borrowers of color. ...................18

A.

A totality-of-thecircumstances test

comports with the text and

serves the purposes of the

undue hardship exception. .......18

B.

A simpler, more flexible

totality-of-thecircumstances test would

help debtors with fewer

resources, often borrowers

of color, to obtain a “fresh

start.” .........................................21

CONCLUSION ..........................................................22

ii

TABLE OF AUTHORITIES

CASES:

Andrews v. South Dakota Student Loan

Assistance Corp. (In re Andrews),

661 F.2d 702 (8th Cir. 1981) ............................4

Armstrong v. U.S. Dep’t of Educ. (In re Armstrong),

Bankr. No. 10-82092, 2011 WL 6779326

(Bankr. C.D. Ill. Dec. 27, 2011) ......................10

Bronsdon v. Educ. Credit Management Corp.

(In re Bronsdon), 435 B.R. 791

(B.A.P. 1st Cir. 2010)..................................4, 19

Brunner v. New York State Higher Educ. Serv.,

831 F.2d 395 (2d Cir. 1987) .................... passim

Educ. Credit Mgmt. Corp. v. Durrani,

320 B.R. 357 (N.D. Ill. 2005) ..........................16

Educ. Credit Mgmt. Corp. v. Frushour

(In re Frushour), 433 F.3d 393

(4th Cir. 2005)...........................................5, 7, 8

Educ. Credit Mgmt. Corp. v. Jesperson,

571 F.3d 775 (8th Cir. 2009) ..........................20

Educ. Credit Mgmt. Corp. v. Mason (In re Mason),

464 F.3d 878 (9th Cir. 2006) ............................5

Educ. Credit Mgmt. Corp. v. Polleys,

356 F.3d 1302 (10th Cir. 2004) ..............5, 8, 10

iii

Gleason v. Thaw,

236 U.S. 558 (1915) ........................................18

Grogan v. Gamer,

498 U.S. 279 (1991) ........................................16

Hemar Ins. Corp. of Am. v. Cox (In re Cox),

338 F.3d 1238 (11th Cir. 2003) ........................5

Hoffman v. Tex. Guaranteed Student Loan Corp.

(In re Williams), No. 15-41814, No. 16-4006,

2017 WL 2303498 (Bankr. E.D. Tex.

May 25, 2017) .................................................15

In re Bene,

474 B.R. 56 (Bankr. W.D.N.Y. 2012) ...............9

In re Durrani,

311 B.R. 496 (Bankr. N.D. Ill. 2004) .............16

In re Hicks,

331 B.R. 18 (Bankr. D. Mass. 2005) ..........6, 19

In re Hornsby,

144 F.3d 433 (6th Cir. 1998) ............................8

In re Ivory,

269 B.R. 890 (Bankr. N.D. Ala. 2001)..............8

In re Larson,

426 B.R. 782 (Bankr. N.D. Ill. 2010) .............16

In re Marshall,

430 B.R. 809 (Bankr. S.D. Ohio 2010) ...........16

iv

In re Mitcham,

293 B.R. 138 (Bankr. N.D. Ohio 2003) ........ 8-9

In re Mosley,

494 F.3d 1320 (11th Cir. 2007) ........................7

In re Pelkowski,

990 F.2d 737 (3d Cir. 1993) ............................19

In re Roach,

288 B.R. 437 (Bankr. E.D. La.2003) ..............15

In re Roberson,

999 F.2d 1132 (7th Cir. 1993) ..........................5

In re Thoms,

257 B.R. 144 (Bankr. S.D.N.Y. 2001) ............15

In re Wolfe,

501 B.R. 426 (Bankr. M.D. Fla. 2013) .............6

Krieger v. Educ. Credit Mgmt. Corp.,

713 F.3d 882 (7th Cir. 2013) ......................9, 14

Long v. Educational Credit Management

(In re Long), 322 F.3d 549 (8th Cir. 2003).......4

Marrama v. Citizens Bank of Mass.,

549 U.S. 365 (2007) ........................................16

Nightingale v. North Carolina State Educ. Assist.

Auth., (In re Nightingale),

543 B.R. 538 (Bankr. M.D.N.C. 2016) .............6

v

O’Hearn v. Educ. Credit Management Corp.

(In re O’Hearn), 339 F.3d 559

(7th Cir. 2003)...................................................7

Oyler v. Educ. Credit Mgmt. Corp. (In re Oyler),

397 F.3d 382 (6th Cir. 2005) ........................5, 7

Pa. Higher Educ. Assistance Agency v. Faish

(In re Faish), 72 F.3d 298

(3d Cir. 1995) ................................................5, 7

Roth v. Educ. Credit Mgmt. Corp. (In re Roth),

490 B.R. 908 (9th Cir. B.A.P. 2013) .................6

Teague v. Tex. Guaranteed Student Loan Corp.

(In re Teague), No. 15-34296-hdh7, Adv.

No. 16-03007-hdh, 2017 WL 187557

(Bankr. N.D. Tex. Jan. 17, 2017) ...................15

Thomas v. Dept. of Educ. (In re Thomas),

931 F.3d 449 (5th Cir. 2019) ..................6, 7, 19

U.S. Dep’t of Educ. v. Gerhardt (In re Gerhardt),

348 F.3d 89 (5th Cir. 2003) ....................5, 7, 15

Zook v. Edfinancial Corp. (In re Zook),

No. 05-00083, 2009 WL 512436

(Bankr. D.D.C. Feb. 27, 2009) ..........................5

vi

CONSTITUTIONAL PROVISIONS:

U.S. Const. Art. I, § 8 ..................................................9

STATUTES:

11 U.S.C. § 523 ............................................................9

11 U.S.C. § 523(a)(2)(A) ..............................................9

11 U.S.C. § 523(a)(8) ......................................... passim

11 U.S.C. § 523(a)(9) ...................................................9

26 U.S.C. § 61(a)(12) .................................................16

REGULATIONS:

34 C.F.R. § 682.402(b)(1) ..........................................17

OTHER AUTHORITIES:

H.R. Rep. 95-595, 133, 1978 U.S.C.C.A.N.

5963, 6094–95 .................................................19

CFPB, Annual Report of the CFPB Private

Education Loan Ombudsman (October

2020)................................................................11

CFPB, Snapshot of Older Consumers and

Student Loan Debt (January 2017) ...............20

Cong. Budget Office, The Volume and

Repayment of Federal Student Loans:

1995 to 2017 (November 2020) ......................10

Cong. Rsch. Serv., Bankruptcy and Student

Loans 24 (July 18, 2019) ................................15

vii

Ctr. for Responsible Lending, Quicksand:

Borrowers of Color and the Student

Debt Crisis (September 2019) ........................11

Hannah Fresques and Paul Kiel, Pro Publica,

In the South, Bankruptcy is Different,

Especially for Black Debtors,

(September 27, 2017)................................ 17-18

Jason N. Houle & Fenaba R. Addo, Racial

Disparities in Student Debt and

Reproduction of the Fragile Black

Middle Class, 5(4), Sociology of Race

and Ethnicity 562 (2018) ................................12

Jason Iuliano, An Empirical Assessment of

Student Loan Discharges and the

Undue Hardship Standard, 86 Am.

Bankr. L.J. 495 (2012) ....................................20

Angela Littwin, Low-Income, Low-Asset

Debtors in the U.S. Bankruptcy

System, 29 Int’l Insolvency Rev. S116

(2020) ..............................................................14

Ben Miller, Who Are Student Loan

Defaulters?, Ctr. for American Progress

(December 14, 2017) .......................................13

Nat’l Ass’n of Realtors, Student Loan Debt

and Housing Report (2017) ............................12

viii

Rafael I. Pardo, The Undue Hardship Thicket:

On Access to Justice, Procedural

Noncompliance, and Pollutive

Litigation in Bankruptcy, 66 U. Fla. L.

Rev. 2101 (2014) .............................................14

Rafael I. Pardo, Taking Bankruptcy Rights

Seriously, 91 Wash. L. Rev. 1115 (2016) .......13

Eileen Patten, Racial, Gender Wage Gaps

Persist in U.S. Despite Some Progress,

Pew Research (July 1, 2016) ..........................12

ORCID Lincoln Quillian, Devah Pager, Ole

Hexel, and Arnfinn H. Midtbøen, Meta-

analysis of field experiments shows no

change in racial discrimination in

hiring over time, Proceedings of Nat’l

Acad. of Sciences of United States of

America, 114 (41) 10870-10875;

(October 10, 2017, first published

September 12, 2017) .......................................21

Quicksand: Borrowers of Color and the

Student Debt Crisis (September 2019) ..........21

Judith Scott-Clayton, Brookings Inst., The

Looming Student Loan Default Crisis Is

Worse Than We Thought (January

2018)................................................................12

Laura Sullivan et al., Demos & Inst. on Assets

and Soc. Pol’y, The Racial Wealth Gap:

Why Policy Matters (2015) .............................12

ix

Aaron N. Taylor & Daniel J. Sheffner, Oh,

What a Relief it (Sometimes) Is: An

Analysis of Chapter 7 Bankruptcy

Petitions to Discharge Student Loans,

27 Stan. L. & Pol’y Rev. 295 (2016) ...............10

x

INTERESTS OF AMICUS CURIAE1

The Center for Responsible Lending is a nonprofit organization dedicated to ensuring that

consumers have access to fair financial products, with

an emphasis on consumers who may be marginalized

or underserved in the existing financial marketplace,

including people of color, women, rural residents and

low-wealth families and communities. The Center has

advocated against abuses in student lending practices

and highlighted the burden that the current student

lending system places on people of color and lowwealth individuals and communities. The Center has

also advocated for a bankruptcy system that allows

for the discharge of debts that consumers are not

realistically able to repay, helping individuals and

communities to build financial stability and security.

SUMMARY OF ARGUMENT

Today, student loans are understood to be nondischargeable unless a debtor can show that

repayment would cause “undue hardship” under 11

U.S.C. § 523(a)(8). At its inception, the “undue

hardship” exception to non-dischargeability was a

safety valve, permitting honest but unfortunate

debtors to discharge student loans during the first

five years of repayment, after which those loans were

dischargeable without qualification—by any debtor.

Today, “undue hardship” is the sole avenue for those

In accordance with Supreme Court Rule 37.2(a),

counsel for amicus timely notified both parties of intent to file

this brief and both have provided written consent. Pursuant to

Supreme Court Rule 37.6, counsel for amicus states that no

counsel for a party authored this brief in whole or in part, and

that no person or entity, other than amicus and its counsel, made

a monetary contribution to this brief.

1

1

honest debtors to seek discharge of their student

loans.

Congress did not define “undue hardship,” and

federal courts of appeals have settled on two starkly

divergent tests for defining that term. The totality-ofthe-circumstances approach, used in two circuits,

employs an open-ended set of factors to consider the

individual circumstances of the debtor seeking

discharge. In that test, no one factor is dispositive.

The so-called Brunner test, used by the remaining

circuits, embellishes the statute, requiring debtors to

meet three independent, mandatory prongs. They

must show that they are presently unable to cover

basic expenses while repaying their loans, that their

inability to repay will persist long-term, and that they

have made good-faith attempts at repayment.

Brunner v. New York State Higher Educ. Serv., 831

F.2d 395, 396 (2d Cir. 1987). A number of courts,

including the Fifth Circuit, whose holding is at issue

here, have interpreted Brunner in draconian ways,

demanding “total incapacity” or a “certainty of

hopelessness” in repayment.

The burdens of student debt are felt most

acutely by low-income and low-wealth debtors,

overwhelmingly in communities of color. Because

they and their communities have fewer resources to

cushion the fall or navigate the bankruptcy system, it

is harder to bounce back after financial difficulty.

These challenges are compounded when the

unavailability of discharge denies the “fresh start”

that bankruptcy normally promises. Each of the

Brunner requirements creates an additional hoop of

complexity in pleading and proof that a debtor must

jump through and invites courts to engage in

speculation unwarranted by the statutory text. The

unwarranted complexity, difficulty, and expense

2

discourage low-income debtors from seeking the relief

of the bankruptcy system and makes it harder to

obtain discharge when they do.

A simpler, more flexible, and holistic test for

undue hardship would comport with the text and

purpose of the statute. It would also be more

consistent with the purposes of the Bankruptcy Code,

helping the low-income debtors who most need a

“fresh start.”

ARGUMENT

I.

There is a persistent circuit split on the proper

test for “undue hardship” and the Brunner test

is flawed.

Student loans are excepted from discharge

“unless excepting such debt from discharge . . . would

impose an undue hardship on the debtor and the

debtor’s dependents.” 11 U.S.C. § 523(a)(8). Congress

did not define “undue hardship,” permitting courts to

consider the individual circumstances of each debtor.

A durable split in authority has developed between

the courts of appeals, with some taking a flexible

approach aimed at fidelity to the statutory text and

others adopting a rigid, three-factor test, each prong

of which is demanding and dispositive. Courts of

appeals applying the rigid test have themselves split

further in how harshly each factor is applied.

The primary split is between courts that apply

a “totality of the circumstances” test, under which the

bankruptcy judge considers all the evidence using a

variety of non-exclusive factors, not one of which is

dispositive, and courts that have adopted the

“Brunner test,” which requires three independent,

mandatory showings to qualify for discharge. The

Eighth Circuit has applied some version of a totalityof-the-circumstances approach since 1981. See

3

Andrews v. South Dakota Student Loan Assistance

Corp. (In re Andrews, 661 F.2d 702, 704 (8th Cir.

1981). It has continually reaffirmed that approach on

the grounds that “requiring our bankruptcy courts to

adhere to the strict parameters of a particular test

would diminish the inherent discretion contained in

§ 523(a)(8)(B).”

Long v. Educational Credit

Management (In re Long), 322 F.3d 549, 554 (8th Cir.

2003). The totality-of-the-circumstances test requires

courts to consider a non-exclusive set of factors

encompassing: (1) the debtor’s past, present, and

reasonably reliable future financial resources; (2) a

calculation of the debtor’s and their dependent’s

reasonably necessary living expenses; and (3) any

other relevant facts and circumstances surrounding

each bankruptcy case. Id. Likewise, the Bankruptcy

Appellate Panel of the First Circuit has also adopted

a totality-of-the-circumstances analysis, reasoning

that it “best effectuates the determination of undue

hardship while adhering to the plain text of

§ 523(a)(8).” Bronsdon v. Educ. Credit Management

Corp. (In re Bronsdon), 435 B.R. 791, 800 (B.A.P. 1st

Cir. 2010).

The remaining courts of appeals, though, apply

the Brunner test, which requires debtors to meet

three separate, mandatory requirements not found in

the text of § 523(a)(8): (1) present sub-minimal

standard of living, (2) future persistence of that

hardship, and (3) past good-faith efforts at

repayment. Brunner, 831 F.2d at 396.

Some jurisdictions adopting the Brunner test,

including the Fifth Circuit, have concocted even more

complex and demanding versions, generating

subsidiary conflicts that are more and less

demanding. Both sets of conflicts have proven

durable. These conflicts generate unnecessary

4

complexity and expense and expose debtors to

disparate standards and outcomes.

A.

The circuit split over the proper test for

“undue hardship” is long-standing.

Since the Second Circuit first laid out the

Brunner test in a summary per curiam opinion in

1987, eight other circuits have adopted the test—all

at least a decade ago. See Educ. Credit Mgmt. Corp.

v. Mason (In re Mason), 464 F.3d 878, 881–82 (9th

Cir. 2006); Oyler v. Educ. Credit Mgmt. Corp. (In re

Oyler), 397 F.3d 382, 385 (6th Cir. 2005); Educ. Credit

Mgmt. Corp. v. Frushour (In re Frushour), 433 F.3d

393, 400 (4th Cir. 2005); Educ. Credit Mgmt. Corp. v.

Polleys, 356 F.3d 1302, 1308–09 (10th Cir. 2004);

Hemar Ins. Corp. of Am. v. Cox (In re Cox), 338 F.3d

1238, 1241 (11th Cir. 2003); U.S. Dep’t of Educ. v.

Gerhardt (In re Gerhardt), 348 F.3d 89, 91 (5th Cir.

2003); Pa. Higher Educ. Assistance Agency v. Faish

(In re Faish), 72 F.3d 298, 306 (3d Cir. 1995); In re

Roberson, 999 F.2d 1132, 1135 (7th Cir. 1993).

Indeed, the last circuit to choose a side—opting for

totality-of-the-circumstances—did so ten years ago.2

In re Bronsdon, 435 B.R. at 800.

Observing this conflict and the substance of the

debate, a “crescendo of courts have recognized that

the ‘analysis required by Brunner to determine the

2 Although not adopted by the First Circuit proper, the

majority of bankruptcy courts in the circuit apply the totality

test. In re Bronsdon, 435 B.R. at 798 & n.10. The D.C. Circuit

has not formally adopted either test, but its bankruptcy courts

apply Brunner. Zook v. Edfinancial Corp. (In re Zook), No. 0500083, 2009 WL 512436, at *1 (Bankr. D.D.C. Feb. 27, 2009).

Moreover, formal adoption of either test by the First Circuit or

D.C. Circuit would not alter the fact that there is a functional

conflict between Brunner and totality jurisdictions and between

Brunner jurisdictions themselves.

5

existence of an undue hardship is too narrow, no

longer reflects reality, and should be revised.’”

Nightingale v. North Carolina State Educ. Assist.

Auth., (In re Nightingale), 543 B.R. 538, 544–45

(Bankr. M.D.N.C. 2016) (quoting Roth v. Educ. Credit

Mgmt. Corp. (In re Roth), 490 B.R. 908, 920 (9th Cir.

B.A.P. 2013) (Pappas, J. concurring)). But courts that

have adopted it have resisted calls to reassess it, with

some even viewing the tests relative durability as

reason for inaction. See, e.g., Thomas v. Dept. of Educ.

(In re Thomas), 931 F.3d 449, 453–55 (5th Cir. 2019)

(reasoning that because the Brunner test had

survived several substantive changes to the

Bankruptcy Code that narrowed the other options for

discharge, objections to its stringency were “policy

issues. . . for Congress, not the courts”).

B.

Brunner tests too much and has

generated subsidiary splits.

The Brunner test requires the debtor satisfy

three separate, mandatory prongs to obtain

discharge: present hardship, future inability to pay,

and past good-faith efforts at repayment. In that, it

already “tests too much.” In re Hicks, 331 B.R. 18, 27

(Bankr. D. Mass. 2005). But “[o]ver time, courts have

grafted sub-elements to each of the three parts of the

Brunner test,” proof of which “may force debtors into

inconsistent positions or difficult burdens of proof.” In

re Wolfe, 501 B.R. 426, 434 (Bankr. M.D. Fla. 2013).

Often the dispositive prong of the test, the

second

prong

asking

whether

“additional

circumstances exist indicating that [inability to pay]

is likely to persist for a significant portion of the

repayment period of the student loans,” has generated

the starkest divergences between circuit courts. The

majority of Brunner jurisdictions have placed

6

dispositive weight on evidence of “unique” or

“extraordinary” additional circumstances, requiring

that they amount to a “certainty of hopelessness” for

repayment. Frushour, 433 F.3d at 400 (Fourth

Circuit), Oyler, 397 F.3d at 385 (Sixth Circuit), Faish,

72 F.3d at 307 (Third Circuit); O’Hearn v. Educ.

Credit Management Corp. (In re O’Hearn), 339 F.3d

559, 564 (7th Cir. 2003); In re Mosley, 494 F.3d 1320,

1326 (11th Cir. 2007). Some courts, including the

Fifth and Third Circuits, have even pushed beyond

this draconian burden, requiring that a debtor

demonstrate a “total incapacity” to pay. Faish, 72

F.3d at 307; Gerhardt, 348 F.3d at 92 (adopting the

“total incapacity” standard but not language

requiring a “certainty of hopelessness”) (quoting

Faish, 72 F.3d at 307).

Even where a “certainty of hopelessness” may

be shown with “illness, disability, a lack of usable job

skills, or the existence of a large number of

dependents,” Frushour, 433 F.3d at 401; Oyler, 397

F.3d at 386, as the court below did, this can invite

courts to engage in arbitrary judgments about the

relative difficulty of the circumstances proffered. See

Thomas, 931 F.3d at 452 (finding that a woman with

a degenerative medical condition who had quit jobs

where the employers “were unable to accommodate

her need to remain sedentary for periods of time

during her shifts” did not qualify because she was

“capable of employment in sedentary work

environments”). Ms. McCoy was found ineligible

because her disabilities existed when she took out her

loans and because she had previously been able to

find “various forms of employment.” Pet’r’s Appx. at

6a.

In contrast to these “hard” Brunner

jurisdictions, the Tenth Circuit explicitly rejected the

7

“certainty of hopelessness” and requires a “realistic

look . . . into debtor’s circumstances and . . . ability to

provide for adequate shelter, nutrition, health care,

and the like.” Polleys, 356 F.3d at 1310. Rather than

rely on “unfounded optimism” projected into the

distant future, this “softer” Brunner looks only to

“specific articulable facts” and the “foreseeable

future.” Id.

The first and third prongs have generated less

conflict but still raise problems. The first prong asks

whether the debtor “cannot maintain, based on

current income and expenses, a ‘minimal’ standard of

living . . . if forced to repay the loans.” Brunner, 831

F.2d at 396. While this prong is reasonably

interpreted to not require a debtor “live in abject

poverty before a discharge is forthcoming,” In re

Hornsby, 144 F.3d 433, 438 (6th Cir. 1998), some loan

servicers and some courts have taken the phrase

“minimal standard of living”—grafted onto the

statute by judicial gloss—as license to parse what

expenses are truly “minimal.” See, e.g., Frushour, 433

F.3d at 400 (noting with disapproval that loan

servicer argued that “Internet and cable connections”

were beyond “minimal” standard of living); Faish, 72

F.3d at 307 (finding first prong unsatisfied and noting

that the debtor could continue to take the bus rather

than purchasing a car).

The third prong, invoking “good-faith”

repayment, at first a narrow inquiry aimed at that

rare borrower that dodges debts on the way to a

lucrative career, has since metastasized into a wideranging inquiry into past conduct and life choices.

Debtors have been forced to refute arguments that

they should have avoided having children, In re Ivory,

269 B.R. 890, 910 (Bankr. N.D. Ala. 2001), should not

have assumed custody of grandchildren, In re

8

Mitcham, 293 B.R. 138, 146 (Bankr. N.D. Ohio 2003),

or should not have left school without a degree to care

for aged parents, In re Bene, 474 B.R. 56, 69–70

(Bankr. W.D.N.Y. 2012).

The good faith requirement is also inconsistent

with the text. Congress knew how to authorize

inquiries into past conduct and make certain debts

dischargeable based on past conduct—and did so

elsewhere in § 523. See, e.g., 11 U.S.C. § 523(a)(2)(A)

(debts obtained by “false pretenses, a false

representation, or actual fraud”); Id. § 523(a)(9) (debts

related to “death or personal injury caused by the

debtor’s operation of a motor vehicle” while

intoxicated). By contrast, Congress made no explicit

provision for student loan dischargeability to turn on

good faith or past conduct, providing further indicia

of its irrelevance.

The subsidiary conflicts over the stringency of

the Brunner test have persisted despite voices

dissension from judges on courts that apply more

stringent standards. See, e.g., Krieger v. Educ. Credit

Mgmt. Corp., 713 F.3d 882, 885 (7th Cir. 2013)

(Easterbrook, J.) (questioning the correctness of the

“certainty of hopelessness” standard).

C.

These splits expose debtors to materially

different law and outcomes between

jurisdictions.

These

conflicts—between

“totality”

jurisdictions and Brunner jurisdictions, and between

“hard” and “soft” Brunner jurisdictions—contravene

the need for “uniform laws on the subject of

bankruptcies throughout the United States.” U.S.

Const. Art. I, § 8. Uniformity is also important from a

practical perspective. As post-secondary degrees

become increasingly necessary for economic

9

advancement, people often attend school and work in

multiple states over the course of their lives. Securing

the uniformity mandated by the Constitution ensures

debtors can move without facing different standards

and different outcomes between jurisdictions.

Uniformity also makes practical sense given the

predominance of federal and federally-backed student

loan debt. See, e.g., Cong. Budget Office, The Volume

and Repayment of Federal Student Loans: 1995 to

2017 (November 2020), https://www.cbo.gov/system/

files/2020-11/56706-student-loans.pdf.

Formally, the two tests resemble one another,

“with many overlapping considerations,” In re

Bronsdon, 435 B.R. at 798, and “often consider[ing]

similar information—the debtor’s current and

prospective financial situation in relation to the

educational debt and the debtor’s efforts at

repayment,” Polleys, 356 F.3d at 1309. But in

practice, the differences can be outcomedeterminative and yield different rates of discharge.

See, e.g., Armstrong v. U.S. Dep’t of Educ. (In re

Armstrong), Bankr. No. 10-82092, 2011 WL 6779326,

at *9 (Bankr. C.D. Ill. Dec. 27, 2011) (“Under the

totality of circumstances test, it could be concluded

that these circumstances constitute a hardship that is

undue. However, the more restrictive Brunner test

does not clearly admit such an exception.”); Aaron N.

Taylor & Daniel J. Sheffner, Oh, What a Relief it

(Sometimes) Is: An Analysis of Chapter 7 Bankruptcy

Petitions to Discharge Student Loans, 27 Stan. L. &

Pol’y Rev. 295, 319, 331 (2016) (finding “much higher”

discharge rates in the First Circuit, a totality

jurisdiction, than the Third Circuit, a Brunner

jurisdiction, and suggesting that the disparity derives

from “the different undue hardship tests applied in

the circuits”).

10

The Brunner test has stretched beyond the text

of § 523(a)(8) to create conflict, complexity, and

difficulty where none is warranted. Worthy debtors

suffer as a result. Because the courts of appeals are

unlikely to expediently resolve these differences on

their own, review by this Court is warranted.

II.

People of color and low-income debtors are

burdened more heavily by Brunner’s restrictive

approach.

A.

Student debt weighs more heavily on

borrowers of color and exacerbates the

racial wealth gap.

Student debt has exploded in recent years. In

2020, nearly 45 million student borrowers owed

$1.677 trillion. CFPB, Annual Report of the CFPB

Private Education Loan Ombudsman, 31 (October

2020). The average amount owed in 2020 is about

$37,000, up from approximately $20,000 in 2008. Id.

at 32. The explosion in the size and scope of student

debt has led millions of Americans—particularly

communities of color—to forego or delay purchases or

investments, holding them back from economic

security and weighing down economic growth.

Few borrowers feel the burden of student debt

more heavily than people of color and people from lowincome and low-wealth communities. See generally

Ctr. for Responsible Lending, Quicksand: Borrowers

of Color and the Student Debt Crisis (September

2019),

https://www.responsiblelending.org/sites/

default/files/nodes/files/research-publication/crlquicksand-student-debt-crisis-jul2019.pdf?mod=

article_inline. First, because borrowers of color

frequently enter the educational system with less

family wealth, they often wind up borrowing

substantially more to cover the cost of education. For

11

instance, Black students take on 85% more student

debt than their white counterparts for their education

and that difference in indebtedness increases by

almost 7% per year after leaving school. Jason N.

Houle & Fenaba R. Addo, Racial Disparities in

Student Debt and Reproduction of the Fragile Black

Middle Class, 5(4), Sociology of Race and Ethnicity

562, 568 (2018). The burden of paying larger debts is

compounded by well-documented disparities in

employment opportunities and pay. E.g., Eileen

Patten, Racial, Gender Wage Gaps Persist in U.S.

Despite Some Progress, Pew Research (July 1, 2016).

Accordingly, delinquencies and defaults on student

loans show similar racial divides. Black bachelor’s

degree graduates’ default rate is five times, and

Latino graduates’ twice, that of white graduates.

Judith Scott-Clayton, Brookings Inst., The Looming

Student Loan Default Crisis Is Worse Than We

Thought,

tbl.4

(January

2018),

https://www.brookings.edu/wp-content/uploads/2018/

01/scott-clayton-report.pdf.

In turn, student debt sands the gears of

economic stability and security. With debt service

often consuming substantial portions of early-career

earnings, even borrowers that can keep their heads

above water are held back from purchasing homes or

making other investments in the future. See Nat’l

Ass’n of Realtors, Student Loan Debt and Housing

Report, 28 (2017) (finding that the average student

loan borrower delays the purchase of their first home

by an average of seven years). Such challenges only

exacerbate the existing racial homeownership gap.

See Laura Sullivan et al., Demos & Inst. on Assets

and Soc. Pol’y, The Racial Wealth Gap: Why Policy

Matters, 9–15 (2015) (describing the role that

significant disparities in home ownership play in

12

reproducing

the

racial

wealth

gap),

https://www.demos.org/research/racial-wealth-gapwhy-policy-matters. Student debt limits the ability of

student borrowers of color to accumulate wealth while

sapping extra income, widening the racial wealth gap.

Because they often have higher debt loads and

are less able to build financial safety nets with things

like home equity and family wealth, student

borrowers of color and others from low-wealth

families encounter financial hardship more acutely.

Of the 7.3 million student loan borrowers who were in

default as of March 2019, research suggests that

approximately 90 percent were Pell Grant

recipients—a proxy for coming from low-income

families—and the median amount owed was less than

$10,000. Ben Miller, Who Are Student Loan

Defaulters?, Ctr. for American Progress (December

14,

2017),

https://www.americanprogress.org/

issues/education-postsecondary/reports/2017/12/14/

444011/student-loan-defaulters/.

Although borrowers of color and low-income or

low-wealth debtors are likely to benefit from

discharge of student debt, they are more likely to lack

financial resources necessary to hire an attorney to

pursue an adversary proceeding to seek student loan

discharge or navigate the complexity of the

bankruptcy system on their own. Rafael I. Pardo,

Taking Bankruptcy Rights Seriously, 91 Wash. L.

Rev. 1115, 1133 (2016). Studies have found that

represented debtors succeed in obtaining student loan

discharges

substantially

more

often

than

unrepresented debtors. Id. at 1139 (noting a

differential of 28.5% to 56.2% in the literature and

26.8% to 44.8% in the study sample).

13

B.

Brunner

and

its

sub-tests

disproportionately burden debtors of

color.

Brunner’s mandatory three prongs and

fractalized sub-requirements not only impose a

higher standard for discharge than required by

§ 523(a)(8), but also add unwarranted complexity to

the legal process. The procedural complexity and

more exacting standards of the Bankruptcy Abuse

and Consumer Protection Act of 2005 made it more

difficult and more expensive for low-income or lowwealth debtors to file for bankruptcy and obtain relief.

Angela Littwin, Low-Income, Low-Asset Debtors in

the U.S. Bankruptcy System, 29 Int’l Insolvency Rev.

S116, S117 (2020). On top of that baseline, “procedure

and burdens of proof governing undue hardship

adversary proceedings have created access-to-justice

barriers that ratchet up the difficulty faced by

student-loan debtors in establishing the merits of

their claims for relief.” Rafael I. Pardo, The Undue

Hardship Thicket: On Access to Justice, Procedural

Noncompliance, and Pollutive Litigation in

Bankruptcy, 66 U. Fla. L. Rev. 2101, 2101 (2014). For

low-income or low-wealth debtors, the Brunner test’s

manifold mandatory requirements intensify the

burdens of seeking and obtaining discharge. Id. at

2119–21.

But access-to-justice burdens are not the only

ones that Brunner—and particularly the Fifth

Circuit’s version—imposes on debtors. Two aspects of

the lower courts’ approach in this case are

paradigmatic of the tendency for “judicial glosses” “to

supersede the statute itself,” Krieger, 713 F.3d at

884—to absurd and draconian effect for low-income

debtors.

14

First, the Fifth Circuit has transmogrified the

second Brunner prong, which ordinarily deals with

future ability to repay, to consider past actions of the

debtor as well. In the Fifth Circuit, “‘[a]dditional

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 Gerhardt, 348 F.3d at 92 (quoting In re Roach,

288 B.R. 437, 445 (Bankr. E.D. La.2003) (quoting In

re Thoms, 257 B.R. 144, 149 (Bankr. S.D.N.Y. 2001)

(cleaned up). In the case of Ms. McCoy, the Fifth

Circuit concluded she had not presented legally

pertinent “additional circumstances” “[b]ecause

critical health issues (a car accident and a facial

burning incident) occurred before [she] took out the

bulk of the loans. . . .” Pet’r’s Appx. at 6a. The

reasoning behind this conclusion is that “‘the debtor

could have calculated that factor into its cost-benefit

analysis at the time the debtor obtained the loan.’” Id.

(quoting In re Thoms, 257 B.R. at 149).

The idea that the student loan debtor “should

have known better” has been embraced by only a

“small minority of courts.” Cong. Rsch. Serv.,

Bankruptcy and Student Loans 24 (July 18, 2019).

Most of those courts are in the Fifth Circuit. See, e.g.,

Hoffman v. Tex. Guaranteed Student Loan Corp. (In

re Williams), No. 15-41814, No. 16-4006, 2017 WL

2303498, at *6 (Bankr. E.D. Tex. May 25, 2017);

Teague v. Tex. Guaranteed Student Loan Corp. (In re

Teague), No. 15-34296-hdh7, Adv. No. 16-03007-hdh,

2017 WL 187557, at *2 (Bankr. N.D. Tex. Jan. 17,

2017). That this is a minority view is for good reason:

it penalizes debtors who pursue educational

attainment despite encounters with adversity. “The

principal purpose of the Bankruptcy Code is to grant

15

a ‘fresh start’ to ‘the honest but unfortunate debtor.’”

Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367

(2007) (quoting Grogan v. Gamer, 498 U.S. 279, 286,

287 (1991)). Penalizing debtors who made an honest

education investment that simply did not work out,

and now find themselves in dire financial straits,

sends the message that if you are poor or have a

disability, giving it a “good college try” is not for you.

Moreover, it wholly disregards Bankruptcy’s purpose

of affording debtor’s like Ms. McCoy a “fresh start.”

Id.

Second, like many low-income debtors, at the

time she filed for bankruptcy, Ms. McCoy qualified for

an income-based repayment plan that did not require

her to make monthly payments. Income-based

repayment plans allow for reduced payments, indexed

to income, and allow for full forgiveness after twentyfive years. Because interest continues to accrue,

income-based repayment plans almost invariably

increase the debt burden, not uncommonly by

multiples. That financial sword of Damocles is

apparent not only to debtors, on whom it exacts a

“psychological and emotional toll,” In re Marshall, 430

B.R. 809, 815 (Bankr. S.D. Ohio 2010) (quoting In re

Larson, 426 B.R. 782, 794 (Bankr. N.D. Ill. 2010), but

also to potential creditors, landlords, and employers;

In re Durrani, 311 B.R. 496, 508 (Bankr. N.D. Ill.

2004), aff’d sub nom. Educ. Credit Mgmt. Corp. v.

Durrani, 320 B.R. 357 (N.D. Ill. 2005). And when the

debt is finally forgiven, the forgiven amount is taxable

as income, generating potentially enormous tax

liabilities for debtors who didn’t have the ability to

make payments in the first instance. 26 U.S.C.

§ 61(a)(12).

The Fifth Circuit declined to consider Ms.

McCoy’s income-based repayment plan in denying

16

discharge. By requiring denial when any one prong is

not met, the Brunner test encourages such shortcircuited analyses. Nevertheless, the court of appeals

observed that her ever-growing debt and future tax

burden was “highly speculative” because “tax laws

can and do change.” Pet’r’s Appx. at 4a n.3. More

morbidly, the court also observed that Ms. McCoy,

then aged 62, might simply die before the end of her

twenty-five-year loan repayment period, noting “the

loan would be discharged without any further liability

to her estate.” Id. (citing 34 C.F.R. § 682.402(b)(1)).

For borrowers in Ms. McCoy’s situation—and many

less extreme ones—the existence of an income-driven

repayment plan, even where the current payment is

zero, should have no bearing on the availability of

discharge. When the “fresh start” of bankruptcy

discharge is available, debtors who cannot pay should

not be told to wait for tax reform or death.

The Brunner test doesn’t just multiply the

procedural hurdles, substantive difficulty, and

expense faced by low-income debtors. By making

single prongs or sub-elements dispositive, it

frequently inflates the importance of legally

irrelevant circumstances, like the timing of a

disability, while allowing courts to disregard clearly

relevant ones, like the growth of an unpayable debt

under an income-based repayment arrangement.

Moreover, the lack of uniformity and variance

from circuit to circuit also creates further racial

inequities. The Fifth Circuit’s jurisdiction covers

states with large Black populations, places that have

been identified as having racialized bankruptcy

filings that exacerbate existing racial wealth

disparities. See Hannah Fresques and Paul Kiel, Pro

Publica, In the South, Bankruptcy is Different,

Especially for Black Debtors, (September 27, 2017),

17

https://projects.propublica.org/graphics/bankruptcychapter-13. This context makes the strictness of the

Brunner test burdensome to the Black borrowers who

are disproportionately represented in the Fifth

Circuit geographies and suggests that Black student

loan debtors whose cases are in front of the Fifth

Circuit face especially stringent legal scrutiny

compared to their peers seeking similar relief in

other, Whiter, geographies.

III.

A totality-of-the-circumstances test comports

with the text and purpose of the Bankruptcy

Code and would better serve low-income

borrowers of color.

A.

A totality-of-the-circumstances test

comports with the text and serves the

purposes of the undue hardship

exception.

Exceptions to discharge are contrary to the

purpose of giving a debtor a “fresh start,” and

therefore “should be confined to those plainly

expressed.” Gleason v. Thaw, 236 U.S. 558, 562

(1915). Congress offered such a plain expression in

§ 523(a)(8), excepting qualified educational loans

from discharge unless requiring repayment “would

impose an undue hardship on the debtor.” 11 U.S.C.

§ 523(a)(8). That exception was created against a

background

presumption

of

dischargeability.

Permitting “undue hardship” discharge preserves

that presumption.

Congress did not define “undue hardship” in

§ 523(a)(8), leaving it to be interpreted according to

its ordinary meaning. Read in the context of the

dischargeability exception, the statutory language

asks whether the debtor will face significant hardship

that will be difficult to endure, or causes suffering, if

18

the loan is made to be repaid rather than discharged.

Put another way and “distilled to its essence,” the

statutory text presents “one basic question: ‘Can the

debtor now, and in the foreseeable near future,

maintain a reasonable, minimal standard of living for

the debtor and the debtor’s dependents and still afford

to make payments on the debtor’s student loans?’”

Bronsdon, 435 B.R. at 800 (quoting In re Hicks, 331

B.R. at 31). That question cannot be reasonably

answered with bright-line rules, and Congress has

not enacted such rules. It is better addressed by

individualized assessments that examine the debtor’s

specific life circumstances and experiences and do not

put dispositive weight on any one factor—in other

words, a totality-of-the-circumstances approach.

A flexible standard is consistent with even the

most restrictive readings of congressional purposes.

Brunner’s restrictive approach to discharge has been

defended on the grounds that it is more consistent

with Congress’ purported two goals of safeguarding

the financial viability of the student loan system and

preventing abuse by undeserving debtors. E.g., In re

Thomas, 931 F.3d at 453 (citing In re Pelkowski , 990

F.2d 737, 742–43 (3d Cir. 1993)). Today, bankruptcy

discharges, pursued by a vanishingly small

proportion of the millions of student borrowers in

default or on income-based repayment, are simply too

negligible to constitute threat to the financial

viability of student loan programs. And there is little

evidence that such abuse, while real, was or is

anything but a rare problem. See H.R. Rep. 95-595,

133,

1978

U.S.C.C.A.N.

5963,

6094–95

(acknowledging that a “few serious abuses of

bankruptcy law” drove the push to make loans

nondischargeable but presenting data showing that

these were not the norm).

19

Even if abuse were a well-founded concern, the

undue hardship exception today applies to a far wider

set of debtors than it did at its inception. Generally,

debtors seeking discharge today are not young

graduates seeking to shirk their loans on the cusp of

a lucrative career: one recent study found that among

debtors seeking discharge, the mean age was 49 and

the median age was 48.5. Jason Iuliano, An Empirical

Assessment of Student Loan Discharges and the

Undue Hardship Standard, 86 Am. Bankr. L.J. 495,

509 (2012). And seniors, often borrowing to finance

education for children or grandchildren, are the

fastest-growing segment of the student loan market

and have a default rate of 37 percent. CFPB,

Snapshot of Older Consumers and Student Loan Debt

2, 11–12 (January 2017). The data simply do not

support the continued use of the unduly restrictive

and over-inclusive Brunner test. Moreover, there is no

reason to believe that courts applying a more flexible,

individualized, and open-ended totality-of-thecircumstances test cannot root out the occasional

malingerer. See, e.g., Educ. Credit Mgmt. Corp. v.

Jesperson, 571 F.3d 775, 782–83 (8th Cir. 2009)

(denying discharge under the totality of the

circumstances test to a licensed, employed, earlycareer attorney who had made no effort to repay any

of his student loan obligations).

Unlike the Brunner test, an open-ended

totality of the circumstances test that holistically

evaluates the situation of each debtor seeking

discharge comports with the text and purpose of

§ 523(a)(8). And it need not hobble a host of “honest

but unfortunate” debtors seeking discharge while

screening out the few undeserving ones.

20

B.

A simpler, more flexible totality-of-thecircumstances test would help debtors

with fewer resources, often borrowers of

color, to obtain a “fresh start.”

Student debt imposes a disproportionate

burden on those who enter the educational system

with less, often students of color. Students of color

frequently need to borrow more to finance education

and are less likely to reap the full economic security

and benefits of that education because of heavier debt

service obligations and systemic racial discrimination

in the workplace. See Quicksand: Borrowers of Color

and the Student Debt Crisis (September 2019);

ORCID Lincoln Quillian, Devah Pager, Ole Hexel,

and Arnfinn H. Midtbøen, Meta-analysis of field

experiments shows no change in racial discrimination

in hiring over time, Proceedings of Nat’l Acad. of

Sciences of United States of America, 114 (41) 1087010875; (October 10, 2017, first published September

12, 2017), https://doi.org/10.1073/pnas.1706255114.

Many of these student borrowers succeed and achieve

financial stability in spite of stacked odds, but many

do not. When it comes to rebuilding personal assets

and economic security after financial hardship, there

is no replacement for a bankruptcy discharge that

gives a truly “fresh start,” unencumbered by old

debts. For many, that discharge must include student

loans to truly allow a new beginning.

It is already difficult to file an adverse

proceeding for the discharge of one’s student loans.

And hiring a lawyer to navigate the process requires

borrowers who are already in financial distress to

bear substantial expense. But that expense is almost

essential given the complexity of the substantive

requirements and standards of proof that have grown

up out of the Brunner test. A simple, flexible totality21

of-the-circumstances test would allow debtors to

present just that: the totality of their circumstances

to the court to show why they should be eligible for

discharge. Less complexity would make it easier for

them to represent themselves successfully,

potentially

reduce

the

expense

of

legal

representation, and reduce the danger that attorney

or client would trip in one of Brunner’s many traps.

Even better, it might encourage more “honest but

unfortunate debtors” who need a fresh start to pursue

it out.

Clarifying undue hardship will not resolve the

myriad inequities in the student loan or bankruptcy

systems. But it is well within the Court’s power to

restore fidelity to the text.

CONCLUSION

For the foregoing reasons, the amicus urges the

court to grant the petition for certiorari.

Respectfully submitted,

WILLIAM R. CORBETT

Counsel of Record

YVETTE GARCIA MISSRI

CENTER FOR RESPONSIBLE LENDING

302 W. Main Street

Durham, NC 27701

(919) 313-8544

Will.corbett@responsiblelending.org

February 3, 2021

22