A teacher’s voluntary decision to obtain advanced degrees made her student loans impossible to discharge, even though her income was wholly insufficient to repay the debt, according to Chief District Judge W. Keith Watkins of Montgomery, Ala.
Judge Watkins invoked the Eleventh Circuit’s 2007 Mosley decision, which adopted the Third Circuit’s interpretation of the Brunner test as requiring “additional circumstances” showing a “certainty of hopelessness” that the debtor will be able to repay the loans. He went on to cite the Third Circuit’s Brightful opinion, which requires the debtor to prove “a total incapacity” to repay the debt “for reasons not within [her] control.”
A single mother of two teenage children incurred $112,000 in student loans to obtain four degrees, including a Ph.D. in special education. Already at the top of the pay scale in her Alabama school district, she had been denied a promotion to an administrative position. A diabetic who was also was morbidly obese, she sought a lateral transfer from being a special education teacher to becoming a science teacher, “where the work is less physical,” Judge Watkins said.
She had $3,450 in net monthly income, including $500 in child support. Her schedules showed a monthly shortfall of $33, even before debt service on the student loans. Those loans required $915 a month for 15 years.
Bankruptcy Judge William R. Sawyer held a trial and discharged the debt under Section 523(a)(8) as imposing an “undue hardship.” On appeal, Judge Watkins reversed and directed entry of judgment excepting the student loans from discharge.
Although the bankruptcy judge found that the teacher’s income was unlikely to increase substantially in the future, Judge Watkins said that the debtor must “ultimately bear the consequences of her decision to obtain loans in order to pursue her multiple educational goals.” Even though she had been denied promotion, he said there were “higher paying jobs available” in her district.
The debtor testified that she did not seek employment elsewhere because she would lose tenure. Although he agreed that her concerns were “understandable,” Judge Watkins said “her decision to stay in the area also is one she made of her own volition after measured deliberations.”
It appears that Judge Watkins interpreted the Third Circuit’s Brightful decision to mean that student loans will not be discharged if incurring the debt was within the debtor’s control. He did not limit that case to situations where improving the debtor’s income was within the debtor’s control, which were the circumstances in Brightful.
Judge Watkins’ rationale could be applied to any case where an individual decided to pursue education, not just advanced degrees. If that is true, his decision seems to mean that illness or some other incapacity must be proven before discharging student loans.
The debtor represented herself on appeal in district court. If a volunteer lawyer takes the case to the Court of Appeals, a pro bono attorney could argue that the Eleventh Circuit did not embrace the notion that a conscious decision to incur debt makes student loans nondischargeable. In that respect, Brightful involved a debtor who did not adequately explain why psychiatric problems caused her income to decline substantially. Brightful did not turn on whether the debtor voluntarily took on student loans.