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Brown v. Education Credit Management Corp.

United States District Court, D. Maine

December 12, 2017



          Nancy Torresen United States Chief District Judge

         Appellant Kathleen Brown challenges the bankruptcy court's final judgment that her student loans, held by Appellee Education Credit Management Corporation (“ECMC”), are non-dischargeable. For the following reasons, I AFFIRM the bankruptcy court's determination.


         While Brown disputes some of the bankruptcy court's factual findings, the following factual background is not contested. Brown incurred the debt held by ECMC to pay for her law school education. Brown enrolled at the California Western School of Law in January 2001 at the age of 44. She received her Juris Doctor in May 2005. Upon graduation, Brown took a series of accounting jobs to support herself. In 2008, she passed the California bar exam. Once she became a member of the California Bar, Brown took a pro bono position at an elder law non-profit to gain legal experience. In May 2009, approximately six months later, Brown decided to leave this position. She thought that the organization liked her, but it would never hire her. Brown sought paid legal work in California, including applying to openings for contract attorneys. She received a “number” of interviews, but reported that potential employers told her that she was too old to hire.

         Also in or around May 2009, Brown gave her daughter a one-half acre lot that she owned in Camden, Maine. Brown's daughter built a house on the lot, and the total value of the improved property was assessed at $226, 000.

         In August 2009, Brown was hit by an SUV while crossing the street. She sustained multiple injuries, including a broken ankle.

         In May 2010, Brown returned to Maine and was sworn in to the Maine Bar. She had at least one job interview. In June 2010, Brown rented an office space in Kennebunk, Maine for $200 a month and opened a solo law practice. She retained one client, who paid Brown $500 to compose a martial dissolution letter. With no additional clients, Brown closed her law office in July 2011. Since that time, Brown has not sought legal work. She took a part-time position at the non-profit Catholic Charities for $10 an hour.

         In 2011, Brown enrolled in nursing school, inspired by the success of her stepbrother. Brown testified she did not know how physically demanding nursing would be. Chronic pain, which Brown had experienced since the 2009 accident, and a separate neck injury of unknown origin, hampered Brown's progress in nursing school. She graduated the nursing program in 2013, but then an illness confined Brown to her bed for the next several months. During that time, she continued to work at Catholic Charities for approximately 15 hours a week.

         In November 2014, Brown took and passed the nursing licensing exam. She began working as a nurse at Durgin Pines in Kittery, Maine the following month. Her wage was $26 per hour, and she worked for 25-30 hours a week. Brown left Durgin Pines and took a position at a nursing staffing agency that placed her at nursing homes. Brown found that while this new position had a worse compensation package, it provided her with more support and afforded her greater control over which days and the number of days a week she worked. Brown typically worked two to three days a week, depending on whether she felt able to do more. Brown testified that she looked for less physically demanding nursing jobs, but that she is unqualified for them due to her lack of experience in an acute care hospital setting.

         Brown continues to experience severe pain in her neck, right hip, and right ankle. Brown has never applied for Social Security Disability Insurance (“SSDI”), and she does not have a prescription for pain medication.

         The bankruptcy court determined that Brown's gross income in 2015 was $32, 530.50 and that this amount barely covered her most basic living expenses. Brown also has deferred necessary and significant medical, dental, home, and car expenses. At the time of the trial, Brown projected that her 2016 income would be lower. She also expressed a plan to start drawing from her social security benefits in 2017 at the age of 62 and to cut back the hours she works.


         Brown filed for Chapter 7 bankruptcy in February 2015. The bankruptcy court held an evidentiary hearing on September 23, 2016. Brown proceeded pro se and was the sole witness. On February 24, 2017, the bankruptcy court issued its final determination that Brown failed to establish sufficient evidence of hardship to justify discharge of her student loans. In making this determination, the court declined to credit some of Brown's testimony on the basis that it was contradictory or improbable. Brown timely appealed that determination and opted to file her appeal with the District of Maine.


         When a district court reviews a bankruptcy court's final judgment on appeal, the district court may affirm, modify, reverse, or remand the judgment. Crawford v. Riley (In re Wolverine, Proctor & Schwartz, LLC), 436 B.R. 253, 260 (D. Mass. 2010). Questions of law are reviewed de novo, while the underlying factual findings must stand unless they are deemed clearly erroneous. Bronsdon v. Educ. Credit Mgmt. Corp. (In re Bronsdon), 435 B.R. 791, 796 (2010). In reviewing an appeal, courts should give “due regard . . . to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st Cir. 1997).


         The question on appeal is whether Brown failed to satisfy her evidentiary burden to show repayment of her student loan would pose an undue hardship.

         I. Dischargeability of Student Loans

         Under the Bankruptcy Code, student loans are not subject to the general rule of dischargeability, but rather a student loan may be discharged only where the debtor can show that payment of the debt “would impose an undue hardship on the debtor.” 11 U.S.C. § 523(a)(8). Courts employ a burden-shifting analysis for the undue hardship inquiry. First, the creditor bears the burden of showing that the debt is the type excepted from discharge under § 523(a)(8). Educ. Credit Mgmt. Corp. v. Savage (In re Savage), 311 B.R. 835, 837 (B.A.P. 1st Cir. 2004). Here, the parties agree that Brown's student loans are regulated by § 523(a)(8). The burden therefore shifts to the debtor to show that not discharging this debt would cause the debtor and her dependents “undue hardship.” Id.

         Most courts in the First Circuit analyze the existence of an undue hardship under the totality of the ...

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