Honorable Jim D. Pappas, United States Bankruptcy Judge.
In this adversary proceeding, chapter 7
A trial in the adversary proceeding was conducted by the Court on December 3 and 4, 2015, at which the parties appeared and offered testimony and evidence; closing arguments were to be submitted later via briefs. Dkt. No. 80.
Prior to the filing of the briefs, DOE and Plaintiff reached a compromise allowing the discharge of a portion of the DOE debt; the deal was evidenced by a stipulation as well as a consent judgment entered by the Court. Dkt. Nos. 81, 82.
Unable to resolve their disagreement, Plaintiff and ECMC filed their posttrial briefs, Dkt. Nos. 91, 94, 98, and the issues were taken under advisement.
The Court has now considered the record, evidence and testimony, the parties' arguments and briefs, as well as the applicable law. This Memorandum sets forth the Court's findings of fact, conclusions of law, and its decision concerning the issues. Rules 7052; 9014.
Plaintiff filed her chapter 7 petition commencing the bankruptcy case on May 14, 2010. In re McDowell, No. 10-40845-JDP, Dkt. No. 1 (Bankr.D.Idaho May 14, 2010). A discharge was entered, and the bankruptcy case was closed on September 7, 2010. McDowell, Dkt. Nos. 20, 21. Plaintiff did not seek to discharge her student loans while the case was open.
On May 24, 2013, Plaintiff filed a motion to reopen the bankruptcy case to address the student loans. McDowell, Dkt. No. 25; Ex. No. 310. On May 31, 2013, the Court granted her motion. McDowell, Dkt. No. 27; Ex. No. 311.
As of April 2015, the balance due on Plaintiff's various student loans still in dispute with ECMC, including accrued interest, totaled approximately $93,000, with interest accruing at seven percent per annum. Klisch Aff. at 3, Ex. 250. The amounts Plaintiff originally borrowed, roughly $56,000, financed her undergraduate and graduate college degrees in social work, which she received from Idaho State University and Walla Walla University in 2005 and 2006 respectively. Ex. 220 at 2.
Following graduation, Plaintiff consolidated her loans in June 2007.
After bankruptcy, Plaintiff attempted to repay the loans through a so-called "Income Based Repayment Plan" ("IBR plan"). See Ex. 212 at 1. However, the IBR plan was terminated when she was granted forbearance from making payments from April 2012 until March 2013. Id. Following that period, Plaintiff's request for further forbearance was denied because she had exhausted the maximum forbearance allotted by her lender. Exs. 212, 214. Shortly thereafter, in April 2013, Plaintiff applied and qualified for another IBR plan, under which her monthly payments were to be $357.22. Ex. 217. The Court is unaware of the current repayment status of Plaintiff's loans or the IBR plan. However, as of April 2015, ECMC estimates that, given her total loan balance of approximately $93,000, under a repayment plan of 30 years, with seven per cent interest per annum, Plaintiff's monthly payment would be approximately $620. Ex. F to Klisch Aff. at 2, Ex. 250.
ECMC's records concerning Plaintiff's student loans reflect that Plaintiff has paid a total of only $1,534.04 towards the debt.
Plaintiff testified that she also made attempts to receive repayment assistance through the National Health Service Corporation ("NHSC"). In 2012, she briefly left her job at Eastern Idaho Regional Medical Facility ("RMF") to work for a community agency affiliated with NHSC, but Plaintiff returned to RMF after only
In its posttrial brief, ECMC explained that on December 17, 2015, the DOE launched a Revised Pay As Your Earn, or REPAYE plan. ECMC's Posttrial Br. at 21-22, Dkt. No 94.
Plaintiff is forty-three years old, single, and the mother of two children. She was married to her first husband, the father of her daughter, from January 1991 until June 1997, when they divorced. Pl.'s Resp. to ECMC's Interrog. No. 25, Ex. 224. She married her second husband, the father of her son, in March 1999, and they divorced in December 2007. Id. Plaintiff testified that her second husband worked while she attended college, and that their divorce, which occurred shortly after she graduated and began working full-time, created challenges for her and was one of the reasons she applied for deferments on repayment of her student loans as long as she could. See also Pl.'s Mar. 2015 Dep. at 44-45, Ex. 342 (i.e., when asked about her bankruptcy filing in 2010, Plaintiff responded that her divorce was bad financially for her).
Plaintiff's fifteen-year-old son resides with her and depends upon her for his support. When asked during her deposition if the father contributed towards the son's support, Plaintiff responded, "we don't have child support, but we share custody of him. So, he often helps not with monetary expenses, but just if he needs something or he feeds him, of course. I pay the medical insurance and take care of all his material needs, too." Pl.'s Sept. 2014 Dep. at 79-80, Ex. 343.
Daughter was a full-time college student from fall 2009 until she graduated with a bachelor's degree in psychology in August 2014. Daughter's Transcripts, Ex. 329. Daughter began working in December 2014. Pl.'s Mar. 2015 Dep. at 15, Ex. 342. As of February 2015, Daughter was earning a net income of approximately $1,500 per month. Id. at 11; Daughter's Pay Statements, Ex. 238. Despite this, Plaintiff continued to help cover Daughter's expenses because she felt much of Daughter's income was necessary to pay Daughter's car and student loan payments, as well as medical expenses. Pl.'s Mar. 2015 Dep. at 13-14, Ex. 342.
Plaintiff testified that, as of trial, Daughter was financially independent aside from being included on Plaintiff's health insurance policy and cell phone plan. Plaintiff testified she planned to remove Daughter from both soon. However, Plaintiff also testified she and Daughter occasionally help each other make ends meet because their paychecks are staggered. See, e.g., Pl.'s Bank Statements at 00114, 00153, Ex. 318 (deposits from Daughter); Pl.'s Bank Statements at 00114, Ex. 318 (withdrawal to Daughter).
The amount of financial support Daughter has received from either her biological father, or her step-father, is not apparent from the record. However, Plaintiff testified at trial that, prior to Daughter purchasing a car post-graduation, Daughter had been using a car provided by her "father."
Plaintiff testified that the loans she obtained from DOE, the subject of the stipulation and consent judgment, were used to finance Daughter's first year of college. Plaintiff testified she felt it was necessary to obtain these loans because Daughter did not qualify for financial aid when she began college. As previously noted, Plaintiff has now agreed to repay this loan in monthly installments of $94.99 for the next 15 years. Stipulation and Consent Judgment at 3, Dkt. No. 81.
Plaintiff is a licensed Clinical Social Worker, licensed Clinical Supervisor, and holds a "Designated Examiner Certificate," which Plaintiff testified qualifies her for a variety of occupations in the social work field. Pl.'s Resp. to ECMC's Interrog. No. 6, Ex. 224. Plaintiff has been employed doing social work almost continuously since she obtained her master's degree in December 2006. See Pl.'s Resp. to ECMC's Interrog. No. 1, Ex. 225.
In March 2007, Plaintiff obtained a position as a clinical social worker at RMF.
Plaintiff's annual income increased steadily throughout the early years of her employment, from a low of $40,000 in 2007, to a high of $58,000 in 2013. See Tax Returns, Exs. 201, 204, 205, 206, 207, 211, 213. However, when Plaintiff left RMF in 2013, she took a pay cut from $29.17 per hour to $24.00 per hour at DHW. Pl's Pay Statement at 00536, Ex. 330. Since then, she has received two pay increases, the last coming in April 2015, to $24.89 per hour. Compare Pl.'s Pay Statement, Ex. 107 with Pl.'s Pay Statements, Exs. 108, 238.
Following the job change, Plaintiff testified she supplemented her income on the weekends by working part-time "on-call" shifts at her previous position. She testified she worked only one or two such shifts between August 2013 and April 2014, and then stopped because the job was too physically demanding while she was working full-time for DHW. See also Ex. 344 at 00666; Pl.'s Resp. to ECMC's Interrog. No. 1, Ex. 224 (showing Plaintiff's start date at DHW as August 2013, while her end date at RMF was not until April 2014).
Plaintiff's income has recently decreased because she has reduced the number of hours she works per week. In April 2015, due to her continuing health concerns, and at the recommendation of her supervisor,
While Plaintiff earns less in her position at DHW than she earned at RMF, her new position provides various benefits to Plaintiff. For example, Plaintiff testified that at DHW, the cost of her medical insurance premiums, as well as deductibles, are lower. However, Plaintiff testified the driving factor behind her moving to the position with DHW was to preserve and improve her physical and mental health. At the time she moved to DHW, no medical professional had recommended that she leave her job at RMF,
Plaintiff's working conditions at DHW appear to be improved. Plaintiff testified she now has a set schedule, has a full lunch hour, and can take a break when she needs to. She also testified she now works on a team that can provide help when she needs it. However, while she has benefitted from better working conditions, Plaintiff testified that she felt her overall health condition has not improved, and indeed may have even become worse. See also Pl.'s Mar. 2015 Dep. at 24-25, Ex. 342 (indicating Plaintiff was unsure her new job had decreased her stress level or helped her physically since she was still working with people with mental health issues). Plaintiff explained that she has experienced little relief even working 32 hours per week because she spends her days off at various doctors' appointments. She also explained that, because she is using her paid leave to supplement her decrease in income, she has no leave time available to accommodate any prolonged absence from work.
Plaintiff testified that she has attempted to obtain other less demanding employment in her field. She regularly researches job listings but has found that most open positions come with reduced or uncertain pay. She testified she was offered a counseling position in the private sector, but that it included no health insurance benefits, and the pay was lower and uncertain. She also testified she applied and interviewed for a job at RMF that would not involve the direct care of patients, but she was not offered that position.
Plaintiff also entertained the notion of becoming a photographer, an occupation she thinks she would enjoy. While she underwent some training for that occupation (discussed below), she has since discovered that switching to that field would likely result in a significant and unacceptable reduction in pay.
In sum, at her current wage of $24.89 per hour, assuming Plaintiff works 32 hours per week, her gross pay is roughly $3,450 per month.
On her most recent schedule I, filed in the bankruptcy case November 12, 2015, Plaintiff's approximate $4,300 gross monthly income translated to about $3,215 in take-home pay. Ex. 108. The payroll deductions Plaintiff used to calculate this figure includes not only taxes, but also a monthly contribution to a retirement fund of almost $300, medical and dental insurance premiums of approximately $200, and
As should be expected, Plaintiff has significant monthly living expenses. Her most current schedule J, filed in November 2015, Ex. 109, lists them at $3,555.46, including:
Id. at 2. Plaintiff testified that these amounts represent an average of those she paid during either the three or six months prior to filing this schedule.
At the time of trial, Plaintiff was renting a 3,400 square foot house for only $700 per month from a friend who was attempting to sell it. Id. at 3. Once the home is sold, though, Plaintiff will have to vacate the house, and she expects that she will have to pay at least $200 more each month in rent to find suitable housing. Plaintiff acknowledged she might be able to locate less expensive rental housing, but she was concerned that might require her and her son to live in an unsafe neighborhood.
Plaintiff's utilities expense includes her cell phone and internet costs. She estimates this expense will decrease by approximately $75 when she removes Daughter from her cell phone plan. Pl.'s Mar. 2015 Dep. at 13, Ex. 342. The cost for utilities should also decrease once Plaintiff relocates to smaller housing.
On the other hand, Plaintiff testified her transportation expenses are understated because she included only her average cost for gas and oil changes. She testified she thinks the true costs should be $20 or $30 higher to reflect the need for other regular vehicle maintenance such as tire or brake replacement.
Plaintiff owns a 2007 Toyota Camry with approximately 220,000 miles on it. Despite its age, she testified she is making a
Plaintiff testified that while her expenses for food and housekeeping may seem high, she purchases more expensive food and healthcare products due to various allergies from which she suffers (discussed below).
Plaintiff's monthly medical expenses represent payments for previous medical procedures, insurance co-payments for doctor's visits, medications, and health supplements. Pl.'s Resp. to DOE's Interrog. No. 15, Ex. 325. This figure was generally supported by her testimony and the financial documents she produced. Pl.'s Resp. to ECMC's Req. for Produc. Nos. 23, 24, 25, Ex. 233. Plaintiff testified this figure would be higher at the time of trial because she had been attending counseling sessions and chiropractor appointments, which have co-payments of approximately $15-20 each.
Plaintiff's scheduled installment loan payments include a monthly payment of $100 for "Yolanda Car Loan". Ex. 311 at 4. Plaintiff testified that a payment labeled in the schedule as "Car" is actually a typo, and should be "Carr", the last name of her mother. Plaintiff testified she regularly borrows money from her mother, most recently to travel to South America for photography training. See also Pl.'s Mar. 2015 Dep. at 78-82, Ex. 342. The trip cost approximately $5,900, and while Plaintiff was able to partially finance the trip on her own, she still borrowed roughly $3,800 from her mother. Pl.'s Resp. to ECMC's Interrog. at 00666, Ex. 344; Pl.'s Mar. 2015 Dep. at 85-86, Ex. 342. The parties have no written agreement concerning these loans or payments; Plaintiff's mother keeps track of how much she is owed and instructs Plaintiff concerning how much she needs to pay. In addition to borrowing from her mother, Plaintiff has also received financial support from her father. Plaintiff testified he recently gave her $2,000 to pay her attorney and other medical expenses. See also Pl.'s Bank Statements at 00143, Ex. 318. The record is unclear concerning if or how she intends to repay this amount.
In light of her challenging financial circumstances, in the Court's opinion, over the years, Plaintiff has made some regrettable decisions, which ECMC highlighted in these proceedings. For example, though grossly indebted for her student loans, in 2007, Plaintiff financed the purchase of a used motorcycle with her husband for $10,000.
Plaintiff has also incurred a substantial amount of credit card debt since discharging significant amounts of debt in her bankruptcy case.
Plaintiff also routinely incurs various bank and credit fees and charges. She testified that she frequently over-drafts her checking account knowing that the practice costs her $35 per transaction. See, e.g., Ex. 318 at 00130, 00152. She testified she tries to do this only once per month, for an amount she feels will cover her expenses for the remainder of the month, to avoid incurring this fee multiple times after she has exhausted her funds. Plaintiff also testified that she often is a month behind on internet, credit card, and cell phone payments, which causes her to incur various late fees and charges. See, e.g., Ex. 358 at 01167 (Verizon); Ex. 347 at 00776-00777 (October 2014 Capital One Statement reflecting a $35 late fee with fees for the year of $199); Ex. 322 at 00187 (Cable One). However, she stated that she sometimes makes late credit card payments because she is living paycheck to
Plaintiff also admitted she did not make her mortgage payments from August 2014 until she signed the deed in lieu of foreclosure in June or July 2015. Pl.'s Resp. to DOE's Interrog. No. 17, Ex.325; Pl.'s Supp. Resp. to DOE's Interrog. No. 13, Ex. 314. Her September 2014 mortgage statement reflects that she may have been skipping payments prior to that time, but Plaintiff testified that while her mortgage statement reflected past due payments, during that time she was on some sort of repayment plan to help her catch up. Sept. 2014 Mortgage Statement at 1, Ex. 352. She testified she could not recall what she had done with the extra funds from not making her mortgage payments, but that she was just trying to make it through month to month.
Plaintiff also acknowledged that she received significant tax refunds in 2012 and 2013, but she could not recall how she had spent the funds. See 2013 Federal Tax Return at 0093, Ex. 213 (showing a refund of $3,105); 2012 Federal Tax Return at 0114, Ex. 211 (showing a refund of $1,489). On a smaller scale, in response to questioning by counsel, Plaintiff could not recall where numerous cash withdrawals she had taken from her bank account were spent, although she testified the more recent withdrawals may have been made to implement a cash budgeting system she learned at a financial course she recently attended.
Plaintiff's medical records document the various health issues she has experienced since her student loans became due in 2007. See Ex. 103. In particular, the medical records from Dr. Eric W. Perttula indicate test results suggesting that Plaintiff was experiencing low thyroid levels as early as August 2010. Ex. 103 at 0001. However, a formal diagnosis with attendant treatment for this condition did not begin until 2013.
Plaintiff also testified she was diagnosed with Attention Deficit Hyperactivity Disorder ("ADHD") in college, which causes her to have difficulties concentrating, focusing, and processing thoughts. She previously was able to successfully treat this condition with medication; however, she testified that her medication has been less effective since her thyroid problems began.
In addition to these early issues, Plaintiff testified the bulk of her current health problems began in 2012. That year she underwent two surgeries, one to correct a birth defect in her sinuses, and another for an injury to her knee. She testified it was then that she began to feel like she could not function normally due to fatigue, headaches, sudden weight gain,
While not described in the medical records, Plaintiff testified, and Dr. Wheeler explained in a letter dated March 2, 2015, that Plaintiff also likely suffers from an auto-immune disease that is contributing to her symptoms. See Ex. 102 at 1. Plaintiff described this disease as one where her body is attacking itself, and that the symptoms included daily generalized pain. Shortly before trial Plaintiff was also diagnosed with sleep apnea, the treatment of which has ameliorated some of her fatigue. Ex. 102 at 13.
Plaintiff testified that because she has not responded to traditional methods of treatment, Dr. Wheeler has, with some success, treated her with a combination of prescription medication, over-the-counter medication, and herbal supplements.
In the letter dated March 2, 2015, Dr. Wheeler stated it is probable that Plaintiff's various health problems are chronic and likely to persist through her lifetime. Ex. 102 at 1. In a later letter dated May 5, 2015, Dr. Wheeler opined that Plaintiff's job-related stress is a cause of some of her problems, and that if she continues to work as a social worker, Plaintiff will continue to experience symptoms, which will eventually lead to a premature death. Ex. 112 at 3.
Plaintiff also testified she suffers from food allergies, including gluten and dairy intolerance, which necessitated an extreme change in her diet. While her medical records do not indicate any specific diagnosis concerning dairy, Dr. Wheeler stated in the March 2 letter that she was treating Plaintiff for gluten intolerance, which Plaintiff testified began after she told Dr. Wheeler she had some of the symptoms. Ex. 102 at 1. In a response to an interrogatory, Plaintiff indicated she had seen a Dr. Gene Petty about her food allergies and underwent allergy testing, but those records and test results were not provided to the Court. Pl.'s Resp to ECMC's Interrog. No. 8, Ex. 224. Plaintiff also testified that she has been seeing a nutritionist who prescribed a special diet, but there is no documentation of her visits with the nutritionist in the record. As indicated previously, Plaintiff testified, that due to her allergies, she must often buy supplemental shakes as meal replacements. She also testified she must use specialized makeup, lotions, soaps, and even bathroom tissue, all of which are more expensive than normal.
In addition to providing the Court with Plaintiff's medical records, both parties retained doctors to conduct an independent medical examination ("IME") of Plaintiff. Their opinions are at odds with each other, as well as with that of Dr. Wheeler.
Dr. Simon's report highlights some of Plaintiff's medical history including her thyroid dysfunction, insulin resistance, dyslipidemia, depression, anxiety, joint pain, ADHD, and migraines. See Simon's Report at 2-3, Ex. 247. Despite these notes, Dr. Simon testified that he did not discuss, or could not recall discussing, Plaintiff's complaints about headaches, memory loss, or problems concentrating. He did, however, talk with Plaintiff about her thyroid issues, and recalled that Plaintiff told him that she had consulted an endocrinologist who diagnosed her with Metabolic X Syndrome,
Dr. Simon testified that what stood out to him during the examination was that Plaintiff's pain was an aching, and that she said only stress made it worse, not physical activity. See also, Id. at 4. He testified the evaluation was otherwise unremarkable in terms of any medical issues, and noted she had a good range of motion for her lower back, indicating a low chance of lower back problems.
As for Plaintiff's pain levels, Dr. Simon's report seems inconsistent. At trial, DOE's lawyer focused on Plaintiff's score on the "McGill Pain Questionnaire." In that respect, the report states:
Id. at 6. Dr. Simon further testified that, while not in the report, Plaintiff also rated her overall pain as somewhere between the categories of mild and discomfort. However, in addition to the McGill questionnaire, under "Current Status," the report discloses that "the examinee reports the pain now is a 3. During the last month the pain averaged 3-4, with a high of 8, and a low of 2." Id. at 4. Based upon the testimony, to the Court, the discrepancy in the scores is likely explained by Plaintiff's frame of reference when filling out the McGill questionnaire. Plaintiff testified she filled out the form according to how she felt that day before work; Dr. Simon confirmed she did in fact fill out the form the day of the appointment. Moreover, Dr. Simon testified that, at the examination, he did not explain to Plaintiff whether her answers to the McGill questionnaire should reflect how she was feeling at that time, or more generally.
Dr. Simon concluded in his report that "the only objective diagnosis I can give her is obesity." Id. at 6. The report further provided that, "[o]besity would not keep her from working full-time. There are no objective findings on examination or in her
Dr. Cook,
Dr. Cook testified that he relies on the latest and most well-regarded online sources, and medical journals and texts in making his diagnoses. He further testified that he places great weight on a treating physician's opinions because they have usually spent much more time with the patient. In this case, he felt Dr. Wheeler had had the most success in ameliorating some of Plaintiff's symptoms. And, in regard Dr. Wheeler's May 15 letter, Dr. Cook stated, "[a]lthough stark statements regarding the probability of a premature death are rare in medical opinions, this examiner is in complete agreement with this practitioner's conclusions." Cook's Report at 8, Ex. 100.
When asked about Dr. Simon's report, Dr. Cook expressed concern that Dr. Simon had not completely accounted for, and had too easily dismissed, Plaintiff's various symptoms. Id. at 9-11. Ultimately, Dr. Cook strongly disagreed with Dr. Simon's conclusion that there is nothing preventing Plaintiff from working full-time, and noted Dr. Simon's conclusion is also at odds with Dr. Wheeler's opinion. Id. at 11. As for Plaintiff's pain levels, Dr. Cook's pain disability questionnaire scored Plaintiff at a "92 Moderate Disability." Id. at 15.
Dr. Cook diagnosed Plaintiff with several conditions. His first diagnosis was subclinical hyperthyroidism, possibly of iatrogenic origin. Id. at 15-16. His report provides a detailed explanation for his diagnosis, and provides the following excerpt from an article called "Clinical Impressions and Management of Subclinical Hyperthyroidism: A Review:"
Ex. 100 at 17.
ECMC points out that this article also provides that the significance of the disease
Dr. Cook recognized that his diagnosis disagreed with Plaintiff's treating physician's diagnoses of hypo thyroidism.
Dr. Cook's also diagnosed Plaintiff with "Chronic Headaches, Mixed. Possible Cervicogenic Origin." Id. at 20. The report provides that "Plaintiff's debilitating headaches affecting her concentration, focus, attention, cognition and job function may have a cervicogenic component." Id. at 21. It further provides that this particular type of migraine "demonstrate the greatest loss in domain of physical functioning when compared with the groups with other headache disorders." Id. Ultimately, Dr. Cook concluded that because the required diagnostic steps had not been pursued by any of her practitioners to date, Plaintiff should consult with a qualified neurologist to evaluate her.
Dr. Cook also diagnosed Plaintiff with chronic low-back pain, chronic cervical and shoulder pain, and right upper-extremity weakness. Id. at 22. He testified these were apparent at Plaintiff's physical examination, and while Dr. Simon thought her back should be healed by now, the environment of the spine is not conducive to healing.
Finally, Dr. Cook diagnosed Plaintiff with chronic pain syndrome, one symptom of which is "symptom magnification."
Dr. Cook concluded that Plaintiff's current work duties are problematic. Cook's Report at 25, Ex. 100. However, his ultimate prognosis was "uncertain to guarded" due to the uncertainty surrounding her particular illnesses, and he testified the salient issue was obtaining a definitive diagnoses or explanation of her thyroid dysfunction. Id. at 26. He also felt that Plaintiff had a probability greater than 51% of requiring future medical surgical treatment for pain arising from diagnoses of thyroid disease and back pain. Id. at 27. He testified that overall, to a reasonable degree of medical certainty, Plaintiff experiences chronic pain, particularly in her neck and shoulder area, and will likely have it for the rest of her life. As for the thyroid problem, his impression was that most thyroid conditions are of a permanent nature and require treatment of a permanent nature (either taking medication for the rest of her life or destroying and removing her thyroid altogether).
Finally, Dr. Cook testified that, to a reasonable degree of medical certainty, Plaintiff's continued work will accelerate her medical condition. He testified she has a history of cardiac rhythm disturbances evidenced by medical records, a rapid heart rate when she has anxiety attacks, and skip beats, all of which predispose her to cardiac events, stroke, and other life threatening conditions. He testified this history combined with her thyroid dysfunction puts her at risk of a cardiac event.
In addition to her physical ailments, Plaintiff explained that she also struggles with anxiety, which she testified has been aggravated by her lack of ability to focus and think clearly while treating patients. See also, Ex. 112 (diagnosing Plaintiff with anxiety); Cook's Report at 23, Ex. 100. Dr. Cook testified that Plaintiff told him that she experiences panic attacks, which are infrequent, but are paralyzing when they do occur.
Plaintiff also has been diagnosed with depression, which she testified stems from her inability to do her job and not feeling well everyday. Ex. 102 at 8; Cook's Report at 23, Ex. 100. She testified she temporarily took an anti-depressant medication, but it led to suicidal thoughts, and was discontinued. She testified she has not attempted another anti-depression medication since that time. This seems to be at the suggestion of Dr. Wheeler. Ex. 102 at 9 (noting "Is struggling with depression. Not badly enough to try prescription medication (Prozac made her suicidal).") As previously mentioned, Plaintiff recently began attending counseling sessions again.
Dr. Cook testified these diagnoses are also of a permanent nature, especially in the stressful environment of her work. He felt that without Plaintiff's training in mental health care, the severity of her problems would probably be even more debilitating.
After reviewing Dr. Cook's report, and while the trial was pending, Dr. Simon authored another report indicating that nothing had changed the opinions he expressed in his original IME report. See also Simon Letter at 1, Ex. 249. While he felt a third endocrinologist evaluation was unnecessary because Plaintiff had dismissed the opinions of two prior endocrinologists, he ultimately admitted that an endocrinologist would be the most qualified to help Plaintiff with her thyroid problems. See Id. However, he testified he was certain the treatment was most likely as simple as taking Plaintiff off of her current thyroid medication, and that even if she had the disease it was treatable. See also Id.
As for Plaintiff's prior visits with endocrinologists, Plaintiff testified that she had in fact seen two endocrinologists: Dr. Vance and Dr. Prichione. Plaintiff had previously stated she stopped seeing Dr. Vance because he was "mean and horrible." Ex. 342 at 90 ln. 7. However, she testified it was not that she did not like what he was saying, but that she did not like how she was being treated. She further testified that to her, it was normal for someone who is dissatisfied with a care provider to seek help elsewhere.
In response to Dr. Simon's recommended method of treatment, Dr. Cook stated that Dr. Simon's suggestion was simplistic and overlooked the complexities and controversies regarding treatment of subclinical hyperthyroidism. Cook's Addendum at 3, Ex. 101. Dr. Cook testified there were risks associated with simply removing the medication because the body may have become dependent on it, and that Dr. Simon's suggestion reflected his lack of familiarity with the diagnosis. See also Id. Dr. Cook again noted there was still controversy within the medical community as to the proper treatment of the disease. Id. at 3-5.
Plaintiff testified she had yet to see another endocrinologist as of trial. She testified she found Dr. Wheeler to be more helpful than the endocrinologists she had previously seen, and that Dr. Wheeler was still treating her for the auto-immune response that Dr. Wheeler thought was causing her thyroid levels to fluctuate. Plaintiff further testified that despite lab results indicating that she does not have Hashimoto's disease, Dr. Wheeler was still treating her as if she does.
Finally, regarding her back problems, Plaintiff provided an MRI report of her lumbar spine
Ex. 114 at 1. However, this MRI is dated March 2010, and a more recent evaluation was not presented to the Court. Id. Plaintiff testified she is currently seeing a chiropractor for these issues, but records of these visits are not in evidence. Moreover, her more recent medical records make limited reference to back pain. See Ex. 112, 102, 103. Plaintiff testified this is because she is focused on solving her more serious health concerns with Dr. Wheeler.
In addition to the physicians' IME reports, Defendants also submitted a report in evidence from Nancy J. Collins, a certified rehabilitation counselor, a forensic vocational
In her vocational assessment, Collins concluded that Plaintiff could work in several other social work related jobs, or change fields to human resources or higher education. Id. at 13-15. Of the positions suggested, only one position would result in any substantial increase to her current rate of pay, and in fact, a few of the suggested positions would result in a decrease in hourly wage. See Id.
Concerning Plaintiff's health and her ability to work, the report provides that, "[Plaintiff] does not have any specific physical restriction from any of the medical providers" and "[Plaintiff's] subjective complaints have been consistent over time, but not consistent with any one diagnosis. As far as I can tell, there is still no confirmed medical diagnosis for her that explains her multiple subjective complaints." Id. at 6.
Collins' ultimate conclusion was that, to a reasonable degree of certainty, Plaintiff did not have to leave the field of social work because there are less stressful positions within that field. Id. at 15. She also noted that Plaintiff was now seeing a therapist and was receiving accommodations at work for her medical issues. Id. at 15. Collins further concluded that if social work was too stressful, Plaintiff could find a less stressful job in another field, with wages comparable to what she is earning currently. Id.
Obtaining relief from student loan debts in bankruptcy is an arduous task. Student loan obligations are presumed to be nondischargeable in bankruptcy. Rifino v. United States (In re Rifino), 245 F.3d 1083, 1087 (9th Cir.2001). More precisely, § 523(a)(8) provides that a student loan may be discharged only if it is shown that "excepting such debt from discharge... would impose an undue hardship on the debtor and the debtor's dependents...."
The Code does not define undue hardship. Educ. Credit Mgmt. Corp. v. Jorgensen (In re Jorgensen), 479 B.R. 79, 86 (9th Cir. BAP 2012) (citing Educ. Credit Mgmt. Corp v. Nys (In re Nys), 446 F.3d 938, 944 (9th Cir.2006)). However, that a debtor will struggle if a student loan must be repaid is not enough, since "the existence of the adjective `undue' indicates that Congress viewed garden-variety hardship as insufficient excuse for a discharge of student loans." Rifino, 245 F.3d at 1087.
The debtor bears the burden of proving all three prongs by a preponderance of the evidence. Rifino, 245 F.3d at 1087-1088; Bryant v. Wells Fargo Bank (In re Bryant), 99.3 IBCR 118, 119 (Bankr.D.Idaho 1999). Because the three prongs are independent requirements, "[f]ailure to prove any one precludes discharge." Roth, 490 B.R. at 916 (citing Carnduff v. U.S. Dep't of Educ. (In re Carnduff), 367 B.R. 120, 127 (9th Cir. BAP 2007).
Below, the Court examines each of these requirements in light of the evidence in this case.
This prong has been described as prescribing the "minimum necessary to establish `undue hardship'" and that it "comports with common sense." Pena, 155 F.3d at 1111. To satisfy its requirements, as applied here, Plaintiff must show "more than simply tight finances" and "more than temporary financial adversity," although her condition may be "short of utter hopelessness." United States Aid Funds v. Nascimento (In re Nascimento), 241 B.R. 440, 445 (9th Cir. BAP 1999).
Maximization of income by the debtor is not necessary to satisfy this prong. Educ. Credit Mgmt. Corp. v. Mason (In re Mason), 464 F.3d 878, 882 n. 3 (9th Cir.2006). Calculating the debtor's appropriate cost of living is factual in nature and "is a matter properly left to the discretion of the bankruptcy court." Jorgensen, 479 B.R. at 87 (citing Pena, 155 F.3d at 1112).
Under this analysis, a "dependent" is a minor child or other person to whom the debtor owes a legal obligation to support. Thus, adult children are generally not considered to be dependents for purposes of this analysis. Carlson-Callow v. Sallie Mae Servicing (In re Carlson-Callow), 2008 WL 2357012 *6 (Bankr.D.Idaho 2008). As a result, in this case, only Plaintiff's son is a dependent.
Plaintiff argues she has satisfied the first prong of the Brunner test because her medical problems have caused her to simultaneously experience a decrease of income as well as an increase in expenses. Pl.'s Pretrial Br. at 5, Dkt. 73. In contrast, ECMC argues that Plaintiff can maintain a minimal standard of living and repay her loans because she can earn more than she is currently making, and because her claimed living expenses are too high, merely reflecting that she has not
As income maximization is more appropriately considered in connection with the other prongs of the Brunner test, to test Plaintiff's satisfaction of this prong, the Court will consider Plaintiff's current salary, working 32 hours per week, earning approximately $3,400 per month, and her current expenses.
As for expenses, generally speaking, Plaintiff's payroll deductions and monthly out-of-pocket expenses generally show that she maintains a minimal, rather than some higher standard of living. A few of her expense item, though, deserve specific comment.
First, while ECMC criticizes it, the Court does not question Plaintiff's decision to carry life insurance coverage that would, in the event of her death, pay her beneficiary three times Plaintiff's annual income. Nor is the Court concerned with Plaintiff's decision to carry dental insurance. On the other hand, because Daughter is not a dependent for these purposes, the Court finds Plaintiff's payroll deductions are overstated to the extent Daughter is covered under Plaintiff's medical insurance. Even so, the parties never established whether removing Daughter from Plaintiff's coverage would reduce her premiums, and if so, by how much.
As for Plaintiff's other expenses, her desire to increase her prior budget to account for higher medical and transportation expenses is reasonable. Moreover, her monthly installment payments should be increased to reflect the payments she has now committed to pay to DOE. As such, her claimed monthly expenses would be closer to $3,750.
However, of that $3,750, Plaintiff's monthly utility costs are overstated to the extent they include the $75 in her cell phone bill attributable to Daughter's phone, any fees she incurs for late payments, and the approximately $27 payments necessary to cover her son's expensive phone. Assuming this results in at most $100-150 overstatement, Plaintiff's monthly expenses to maintain a minimal standard of living for her and her son amount to at least $3,600.
Aside from these minor adjustments, the Court finds Plaintiff's expenses consistent with a minimal standard of living. Despite occupying an unnecessarily large house, Plaintiff is paying below-market rent. And, while Plaintiff's budget for food and housekeeping supplies are arguably high, this is primarily due to her special needs, dietary restrictions, and allergies. ECMC pointed out, and the Court agrees, that Plaintiff and her son have a propensity to eat outside of the home, primarily at "fast food" restaurants, which inflates food costs. But, the Court is also mindful that Plaintiff is a working, single mother who has an active teenage boy to feed. Given the other demands in her life and Plaintiff's health concerns, a modest expense for eating out is not inappropriate in measuring a minimal standard of living. Moreover, any reduction proposed to address this factor would be inconsequential.
Finally, while ECMC objects, the Court considers it appropriate for Plaintiff to include credit card payments as an expense item. The reality is that her failure to make these payments would result in the imposition of further fees, late charges, and collection costs. And, while the Court suspects that some of the credit card charges resulted from Plaintiff's poor spending decisions, these arguments are more appropriately considered under Brunner's third prong.
In sum, under the first prong, Plaintiff's approximate $2,550 net income is inadequate to satisfy the $3,600 or so in necessary living expenses she incurs each month. Because Plaintiff is currently living at a deficit without paying any amount on her ECMC student loans, the Court concludes that Plaintiff could not maintain a minimal standard of living were she required to repay those loans.
The second prong requires Plaintiff to prove that her "present inability to pay will likely persist through a substantial portion of the loan's repayment period." Nys, 446 F.3d at 945. Due to the difficulty of predicting future income, courts have required the debtor to demonstrate that "additional circumstances" exist to prove that their present financial situation will persist well into the future. Id. A nonexhaustive list of representative circumstances, as relevant in this case, includes:
Id. at 947. The additional circumstances offered by a debtor to justify discharge of an educational loan are not limited to current events and facts, but may also include those that existed at the time the debtor obtained the educational loans in question. Mason, 464 F.3d at 883-84.
The additional circumstances test focuses upon objective factors when trying to predict a debtor's future income. Nys, 446 F.3d at 945. The debtor "does not have a separate burden to prove them beyond the inability to pay presently or in the future which would justify complete or partial discharge." Id. Thus, "the circumstances need be `exceptional' only in the sense that they demonstrate insurmountable barriers to the [plaintiff's] financial recovery and ability to pay." Id. at 946. This requirement prevents debtors from purposely choosing to "live a lifestyle that prevents her from repaying her student loans." Id. In other words, to discharge a student loan, the debtor can not have had a reasonable opportunity to improve her financial situation, and chosen not to do so.
Plaintiff argues that her health problems, which she alleges currently contributes to her inability to pay her student loans, will be life-long issues and will in the future prevent her from ever being able to repay her student loans. Pl.'s Posttrial Reply Br. at 1-2, Doc. No. 98. Put another way, because of her health issues, Plaintiff argues that her marginal financial situation will continue to deteriorate and her income will likely erode. Id. at 2.
In response, ECMC argues that Plaintiff's medical concerns are not as serious as she claims. As evidence, it points to Plaintiff's demonstrated ability to participate in a large variety of physical activities outside of work, namely the trip to South America. Id. at 17-18. ECMC also attempts to discount Dr. Cook's and Dr. Wheeler's medical opinions for various reasons and claims that Dr. Simon's diagnosis, limited to obesity, is the correct one. Id. at 16-17. ECMC further urges that, even should Plaintiff's health concerns continue, her earnings potential remains quite high, such that her income should be enough to cover Plaintiff's anticipated expenses and pay her loans, were Plaintiff to act more fiscally responsible. Id. at 5-12.
Obviously, here, the most salient issue bearing on "additional circumstances" is the status of Plaintiff's health and its impact on her ability to earn income and limit necessary expenses in the future. To the Court, a decision about Plaintiff's health is challenging because her physicians are still in the process of determining a proper diagnosis and treatment. This analysis is further complicated by the disagreement evident in the opinions of the medical professionals.
While the proof is conflicting, assigning appropriate weight to the opinions offered by the experts leads the Court to find that Plaintiff's medical issues are indeed serious and likely of a permanent nature. Because of that, Plaintiff's medical and other expenses are likely to remain elevated, and her earnings capacity will likely remain limited. In the Brunner vernacular, Plaintiff's present inability to pay her student loans will likely persist through a substantial portion of the student loan repayment period. In sum, the Court concludes that the "additional circumstances" requirement under Brunner has been satisfied in this case.
Multiple doctors have noted Plaintiff's various symptoms over a period of years, including those testifying before the Court. However, these professionals could not agree as to the specific cause or nature of Plaintiff's illnesses, nor was there any consensus about how to treat her. Even so, both Plaintiff's primary physician, Dr. Wheeler, and Dr. Cook seem to agree that her current health concerns are potentially debilitating and will cause longstanding problems for her. They did not agree on a precise diagnosis, but they agreed that Plaintiff has thyroid dysfunction. Moreover, they agreed as to other diagnoses, such as anxiety, depression, migraines, and thyroid dysfunction, that seem to be of a permanent nature, and debilitating in and of themselves.
The Court carefully considered the testimony and opinions of Dr. Simon. On balance, though, the Court is reluctant to rely upon his evaluation of Plaintiff. In comparison to the other physicians, he devoted little time to talking with or examining Plaintiff, or to analyzing Plaintiff's condition. His examination was cursory, his report was unpersuasive, and his conclusions seemed inadequately supported. At
Moreover, while ECMC notes that other tribunals may have found Dr. Cook to have been an advocate for plaintiffs in the past,
As for Ms. Collins' report, the Court finds its conclusions of little value since they are premised on the assumption that nothing currently restricts Plaintiff's ability to work because her complaints are subjective and yet to be confirmed by a professional's diagnosis. This assumption misses the point: while it is correct there is a disagreement as to Plaintiff's correct diagnosis, some of the experts support Plaintiff's account of her symptoms and have diagnosed the existence of legitimate medical problems which inhibit Plaintiff's ability to function at work.
Furthermore, Collins' suggestion that Plaintiff may work full-time not as a social worker, but in a different capacity, or in another field, would likely not improve Plaintiff's financial problems. Even were Plaintiff working 40 hours per week, but at the reduced pay attendant to some of those suggested positions, she would still not earn enough to cover her reasonable expenses. In any event, the Court is not persuaded that Plaintiff is physically able to work full-time in some other capacity, as was evidenced when her symptoms did not improve when she took on a less burdensome job and reduced her hours.
As for ECMC's suggestion that the lack of a reliable diagnosis in this case resulted from Plaintiff's efforts to "doctor shop," the Court disagrees. While it is true that Plaintiff has consulted with several medical professionals to deal with her health issues, those who have attended to her have struggled to address Plaintiff's debilitating symptoms. To the Court, her failure to achieve relief is a rational explanation for Plaintiff's multiple attempts to locate suitable treatment.
Besides Plaintiff's medical problems, there are other circumstances existing that suggest her financial problems will persist long term. At 43 years old, Plaintiff is well into her working career. Her son will be financially dependent upon her for at least three more years, and she has few assets to her name. Plaintiff's expenses are likely to increase. Her housing costs will probably escalate when the house she lives in is sold. While she may pay off her
For all these reasons, the Court finds that, in this case, the "additional circumstances" exist in this case of the type contemplated under Brunner exist making it more likely than not that Plaintiff's inability to repay her student loans will persist through a substantial portion of the repayment period.
The final prong of the Brunner test requires Plaintiff to show that she made good faith efforts to repay the loans, or to show that the forces preventing repayment are truly beyond her control. Brunner, 46 B.R. at 756. This prong is intended to forestall debtors from abusing the bankruptcy system by filing a case primarily to avoid payment of student loan debts. Pena, 155 F.3d 1111.
"Good faith is measured by the Plaintiff's efforts to obtain employment, maximize income, and minimize expenses." Roth, 490 B.R. at 917 (quoting Mason, 464 F.3d at 884 (internal quotations omitted)). The BAP has assembled the following list of factors courts have considered in making a good faith determination:
Roth, 490 B.R. at 917 (citations omitted).
While also not dispositive, another important "good faith" factor focuses upon the debtor's efforts to negotiate a repayment plan. Id. (citing Pa. Higher Educ. Assistance Agency v. Birrane (In re Birrane), 287 B.R. 490, 499 (9th Cir. BAP 2002) and Jorgensen, 479 B.R. at 89, n. 4. In considering such efforts, the terms, duration, and consequences, such as future tax liability and negative credit ratings, need to be considered. Roth, 490 B.R. at 917 (citing Carnduff, 367 B.R. at 136-137).
Plaintiff argues that she has acted in good faith in this case by trying to maximize, or at least to maintain her income, as well as by endeavoring to minimize her expenses. Pl.'s Posttrial Reply Br. at 3, Dkt. No. 98. ECMC strongly disagrees, arguing that many of Plaintiff's financial decisions, and much about her current financial situation, evidence a lack of good faith. ECMC's Posttrial Br. at 20, Dkt. No. 94.
Since graduating in 2006, Plaintiff has maintained employment and sought to maximize her income by working in increasingly responsible positions within the field in which she was educated and trained to work. Initially, she worked full-time and steadily increased her salary for several years. Plaintiff did not experience a decrease in pay until recently, which the Court finds to primarily be the result of the serious health problems Plaintiff has developed, which required her to, among other things, pursue more amenable working conditions.
This is not to say that Plaintiff has not made mistakes in managing her finances, both discrete and chronic, and ECMC is justified in criticizing some of Plaintiff's decisions. For example, Plaintiff's decision while deeply in debt to purchase a motorcycle with her husband on credit, and after divorce, to retain it and make payments on the loan, is difficult to understand. Her decision to borrow and spend thousands for a trip to South American for "training" for an photography occupation that, had she researched it beforehand, would have shown would pay her an inadequate income, was, frankly, foolish. Plaintiff's continuing practices of relying on credit cards and overdrafted checks to live and pay her bills is also clearly problematical and unwise. Her willingness to finance her adult daughter's expenses is commendable, but represents a choice Plaintiff should have declined given the amounts she owes to her creditors. And, Plaintiff's purchase of an expensive cell phone for her teenage son on her constricted budget demonstrates a lack of financial discipline.
On the other hand, Plaintiff did not seek to discharge her student loans shortly after they first became due, or when she was first required to seek bankruptcy relief. While it is true that, over the years, Plaintiff has made few payments totaling insignificant amounts towards retirement of the student loans, during most of the repayment period, Plaintiff had requested and was granted forbearance by the lender due to her financial difficulties. Moreover, Plaintiff twice attempted, albeit unsuccessfully, to repay her loans through IBR plans, and she sought repayment assistance through NHSC. Plaintiff did not seek to discharge her loans until her health problems escalated, causing her to move to a lower paying job while facing increasing expenses. By that time, her loan balance had ballooned to such a balance that it would have been improbable for her to make payments sufficient to ever pay off her loans. At this point in time, Plaintiff is not paying her student loans, not because she can do so but chooses not to, but because she simply lacks the economic ability to do so.
In sum, all things considered, the Court concludes that Plaintiff has demonstrated the requisite good faith to discharge the bulk of her student loans under the Brunner test. She has attempted to earn a good income while living modestly. While her financial decisions have not been perfect, even had she not erred in her spending decisions, she would have nonetheless been unable to make any substantial student loans payments while meeting her normal living expenses. In other words, to the extent that Plaintiff made bad judgments about motorcycles, trips, cell phones and kids, her decisions, at bottom, were largely inconsequential in relation to whether she could have paid her student loans. As a result, that she occasionally made bad financial choices should not disqualify her from securing relief.
Moreover, the Code accommodates situations like this one. The discharge of student loans is not an all or nothing proposition. See Saxman v. Educ. Credit Mgmt. Corp. (In re Saxman), 325 F.3d 1168, 1173 (9th Cir.2003). "Bankruptcy courts may exercise their equitable authority under § 105(a) to partially discharge student loans." Jorgensen, 479 B.R. at 86 (citing Saxman, 325 F.3d at 1173). In doing so, bankruptcy courts have discretion in determining the amount and terms of payment of a partial discharge.
In this case, in the exercise of its discretion, the Court concludes that, under Brunner, Plaintiff is entitled to a discharge of the bulk of the balance due on the ECMC student loans because she can not repay them without undue hardship. By entry of a partial discharge, the Court can, in an equitable fashion, both grant Plaintiff the relief she truly needs, while recognizing that, in the past, Plaintiff may have deprived the lender of a modest amount of funds Plaintiff may have "misspent" under the circumstances.
Presumably recognizing the Court's authority to grant a partial discharge, and the propriety of such remedy under these facts, after trial, ECMC offered to agree to the entry of a partial discharge to reduce Plaintiff's remaining student loan balance to $60,000. ECMC's Posttrial Br. at 22-23. However, ECMC claims that if this course is taken, to allow Plaintiff to maintain eligibility for the various income-driven repayment plans, the contract interest rate must remain the same and no particular payment terms can be set. Id. at 23. While it is significant that ECMC apparently realizes that Plaintiff can not repay the full balance due on her student loans, it offered little to support of the specific amount to be excepted from discharge, and under the evidence, the Court finds ECMC's proposal to be excessive.
Instead, the Court is guided in its decision by case law. For example, in Jorgensen, the bankruptcy court declined to discharge the debtor's student loans for the amount of payments she had made on a car she purchased before traveling abroad for five and a half months, during which time she had no need for the vehicle. 479 B.R. at 86-87. On appeal, the BAP concluded that the bankruptcy court had appropriately exercised its discretion. Id. Concerning the Brunner good faith analysis, the panel stated:
Id. at 89.
Here, where Plaintiff has made several imprudent decisions that were not necessary to maintain a minimal standard of living, and weigh against a finding of good faith, the Court finds it appropriate to nonetheless grant her a partial discharge of the bulk of her student loan debt. Under the facts, the Court concludes that Plaintiff's lack of financial discipline may have consumed $10,000 that would otherwise have been available to pay on her loans. She will not be allowed to discharge that amount of the ECMC debt, but all balances due on the student loans in excess of that sum will be discharged. Contract interest will continue to accrue on that sum, and any of repayment terms
Under § 523(a)(8) and the applicable case law, Plaintiff has shown she can not repay the full balance due on the ECMC student loan debt without an undue hardship. Based upon the facts and equities, the Court concludes that a partial discharge of that debt should be entered. Accordingly, for the explained above, and based upon the facts and equities, all amounts owed by Plaintiff on the ECMC loan in excess of $10,000 will be excepted from discharge.
Counsel for parties shall submit an approved form of judgment for entry by the Court.
Under the stipulated judgment, Plaintiff will partially discharge this debt, leaving her with a balance of $10,000, "which includes the original principal of $8,477 and capitalized interest of $1,523, with an interest rate of 7.9 percent per annum." Id. at 3. Plaintiff is obligated to make monthly payments of $94.99 commencing in March 2016, for 15 years or until the judgment debt is paid in full. Id. The judgment also provides that Plaintiff may not participate in any income-driven repayment plans or any other payment programs normally available for student loans. Id.
Id. at 12.