BRUCE A. HARWOOD, Bankruptcy Judge.
Rami Morris (the "Debtor") filed a complaint under 11 U.S.C. § 523(a)(8) seeking to discharge his student loans. He contends that the repayment of his student loans imposes an undue hardship on him and his dependents. The Massachusetts Educational Financing Authority ("MEFA") holds the notes and denies that payment of these debts imposes an undue hardship. The Court held a trial on January 31, 2019, and took the matter under advisement.
This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and Local Rule 77.4(a) of the United States District Court for the District of New Hampshire. This is a core proceeding in accordance with 28 U.S.C. § 157(b).
The Debtor is a married, forty-eight-year-old man with two children, an eight-year-old daughter and a fourteen-year-old son. In 1995, he graduated with a bachelor's degree in accounting from American College in Greece. In 1997, the Debtor and his wife married. For the next thirteen years, the Debtor worked in Boston in the financial industry. From 1998 to 1999, he worked as a bond analyst and portfolio accountant/administrator at State Street Bank. From 1999 to 2006, he worked as a junior research analyst, an assistant portfolio manager, and a performance measurement manager at Mellon Financial. From 2007 to 2010, he worked as a portfolio manager at State Street Global Advisors. During this time, the Debtor decided to attend graduate school on a part-time basis in order to advance his career.
The Debtor borrowed money from MEFA as follows to fund his graduate studies:
The Debtor obtained a master's degree in business administration from Boston University School of Management in 2008. He also attended the "Tuck Executive Program, Leadership and Strategic Impact" at the Tuck Business School in Hanover, New Hampshire, as well as the "Investment Strategies and Portfolio Management" program at the Wharton School of Finance in Philadelphia, Pennsylvania. The dates of the Debtor's attendance at these two programs were not disclosed at trial.
The Debtor began repaying MEFA's loans on or about December 28, 2008. The payment required for the February 2007 Loan was $194.23 per month for fifteen years. The June and August 2007 loans were apparently consolidated (together, the "June/August 2007 Loan"), and the payment for the June/August 2007 Loan was $444.48 per month for twenty years. The Debtor made consistent payments on his student loans from 2008 through 2010.
In 2010, the Debtor lost his job with State Street Global Advisors due to the financial recession. The Debtor did not work for a lengthy period thereafter.
In 2013, the Debtor's wife was diagnosed with breast cancer. Despite her illness, the Debtor's wife did not miss any time from her teaching job that year.
In August 2013, the Debtor requested and was granted modified payment terms on his student loans, starting that month. Under the modified payment terms, the amounts due each month were reduced for a period of twenty-four months.
In total, between December 2008 and June 2014, the Debtor paid $44,903.93 to MEFA. He made seventy-one payments on the February 2007 Loan in the total amount of $13,790.33, and he made seventy payments on the June/August 2007 Loan in the total amount of $31,113.60.
In 2014, the Debtor and his wife decided to downsize and reduce their expenses. They sold their home in April 2014, with the Debtor's wife buying a new one with lower monthly expenses a few months later in July 2014. In addition, in 2014, the Debtor began working in the restaurant industry as a food runner, a server, and a line cook. Between 2014 and December 2018, the Debtor worked at least thirteen restaurant jobs at places such as UNO Pizzeria & Grill, the 99 Restaurant, Bertucci's, the Olive Garden, Burton's Grill, Texas Roadhouse, and Del Frisco's Double Eagle Steakhouse.
Despite the Debtor obtaining employment in 2014, the Debtor's family still experienced financial difficulties in 2015 and 2016, as both the Debtor and his wife had cars repossessed in those years. In addition, the Debtor experienced medical issues in 2016 and 2017. In October 2016, he was diagnosed with colon cancer, which required emergency surgery to remove a tumor. The Debtor also underwent chemotherapy for a little more than three months from November 2016 to March 2017. In 2017, the Debtor received financial assistance from various cancer foundations in an aggregate amount of $2,700.00.
The Debtor has tested positive for the MSH2 Lynch Syndrome mutation, which means he has a higher risk of developing certain cancers during his lifetime and must have an annual endoscopy and colonoscopy. In addition, he has inflammatory arthritis and experiences stiffness and pain in his joints.
The Debtor's and his wife's annual income and tax refunds have been as follows between 2014 and 2018:
The Debtor is currently unemployed. While he has medical issues as described above, they do not prevent him from working. He states "he will be whatever he has to be" to support himself, his family, and his future. He is actively looking at "everything." Between December 13, 2016, and January 2019, the Debtor has applied, without success, for more than one hundred jobs in positions ranging from sales representative to financial analyst and CEO to airport operations crew and corrections officer.
The Debtor filed a chapter 7 bankruptcy petition January 5, 2018. The Debtor's monthly expenses according to his bankruptcy schedules and documentary trial evidence are as follows:
There are discrepancies between the two sets of expenses that were not addressed at trial, most notably the expenses in the categories of "water, sewer, garbage collection"; "home maintenance"; and "credit card bills."
In his bankruptcy schedules, the Debtor listed $107,460.68 in unsecured debt, including $73,016.92 in student loans. As of the petition date, the Debtor owed the following amounts to MEFA:
The loans are not presently accruing interest. The February 2007 Loan has a monthly payment of $194.23 with a remaining term of approximately 95 months. The June/August 2007 Loan has a monthly payment of $444.48 with a remaining term of approximately 123 months.
The Debtor received a discharge of his non-student loan debt on April 4, 2018. The Debtor testified that his household credit card debt exceeded $41,000.00 as of January 24, 2019; these accounts are all in the Debtor's wife's name. In addition, the couple has borrowed $6,600.00 from the wife's parents, which needs to be repaid. The Debtor further testified that his vehicle stopped running shortly before trial. When necessary, the Debtor has been renting a car to get around. Lastly, the Debtor testified that in order to maintain an income of $18,000.00 a year in retirement he will need save $325,000.00 by the age of sixty-six. He currently has no retirement savings or savings of any kind.
A debtor cannot discharge his or her student loans "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);
"The creditor bears the initial burden of establishing that the debt is of the type excepted from discharge under § 523(a)(8). Once that showing is made, the burden shifts to the debtor to prove that excepting the student loan debt from discharge will cause the debtor and her dependents `undue hardship.'"
MEFA has met its initial burden outlined above as the Debtor does not dispute that the February 2007 Loan and the June/August 2007 Loan are the kind of student loans described in § 523(a)(8).
The Debtor is a well-educated and articulate individual, as exemplified by his efforts representing himself in this proceeding, with valuable employment experience and a capacity to earn more money than he does now.
Although the Debtor was unemployed as of the date of trial,
On a net basis, the Debtor's wife's bi-weekly paycheck dated December 28, 2018 reflected earnings of $1,964.93, which translates into average net earnings of $4,257.35 per month. This does not include the additional earnings of $1,985.00 she received during the year in the form of a stipend, which should result in additional monthly income of $165.42. If the Debtor were to earn $30,000.00 on an annual basis, and if he were to net seventy-five percent of that income, the Debtor could contribute $22,500.00 on an annual basis ($1,875.00 on a monthly basis) to his family's support.
The Court notes further that the Debtor's income tax refunds are another source of reliable funds that may be used to support the Debtor and his family. Paul, 337 B.R. at 737. The Debtor's and his wife's income tax refunds have ranged from $4,731.00 to $7,574.00 between 2014 and 2017, resulting in additional funds being available in the average amount of $6,274.80 annually ($522.90 monthly).
Thus, taking all of these sources together, the Debtor's net household income should total $6,820.67 per month.
Under the totality of the circumstances test, "a debtor must show that [his] necessary and reasonable expenses leave [him] with too little to afford repayment."
The Debtor's monthly expenses totaled $6,491.00 on his bankruptcy schedules and $6,941.71 as of the date of trial. There were discrepancies between the two sets of expenses that were not explained. For example, the Debtor's schedules reflect $700.00 in property maintenance expenses, which amounts were not reflected in the Debtor's expenses as presented at trial. Thus, the Court could conclude that the $6,491.00 figure is overstated by $700.00, thus reducing the Debtor's expenses to $5,791.00 (not including the Debtor's student loan payments which were omitted from Schedule J). In addition, the Debtor's expenses at trial reflect $761.00 in monthly credit card payments due on his wife's cards. Further, some of the expense figures seemed high to the Court (e.g., electricity and telephone and cable services), but these expenses were not challenged by MEFA.
Overall, in the Court's view, the Debtor and his dependents should be able to maintain a minimal standard of living with monthly expenses totaling $6,100.00, not including the Debtor's student loan payments. With average monthly net income of $6,820.67, the Debtor should be able to make the $194.23 payment on the February 2007 Loan and the $444.28 payment on the June/August 2007 Loan and still maintain a minimal standard of living. Under the current payment terms, the February 2007 Loan would be paid in less than eight years and the June/August 2007 Loan in a little more than ten years, thus many years before the end of the Debtor's working life.
"The third factor under the totality of the circumstances test is whether there are other relevant facts or circumstances `unique to the case' that would prevent a debtor from maintaining a minimal standard of living."
The Debtor also indicated at trial that he would like to be able to save for retirement. He specifically testified that he would need to save $325,000.00 by age sixty-six if he wanted to have $18,000.00 per year of retirement income. While the Court acknowledges that requiring the Debtor to repay his student loans may preclude him from saving for retirement for some years, the Debtor's inability to afford making such retirement contributions will not diminish his present standard of living, and it does not constitute "undue hardship" within the meaning of the Bankruptcy Code.
The Court is not unsympathetic to the Debtor's financial difficulties, but notes that the Debtor's situation is not unique.
Given the Debtor's current unemployment, however, the Court hopes that the Debtor and MEFA can work together to devise a modified repayment plan, as was done prior to the Debtor's bankruptcy filing, in order to alleviate some of the Debtor's present financial difficulties.
