Repayment of student loans and undue hardship

U.S. Bankruptcy Court Opinions

IN RE BRUNELL, (Mass. 12-8-2006) IN RE DAVID B. BRUNELL,
JENNIFER GAIL BRUNELL, CHAPTER 7, DEBTORS. JENNIFER GAIL
BRUNELL, PLAINTIFF, v. CITIBANK (SOUTH DAKOTA) N.A.,
EDUCATIONAL CREDIT MANAGEMENT CORPORATION and CHEMICAL BANK
EDUCATIONAL FINANCIAL GROUP, DEFENDANTS. CASE NO.
04-17792-WCH, ADVERSARY PROCEEDING NO. 04-01435. United
States Bankruptcy Court, D. Massachusetts, Eastern
Division. December 8, 2006

MEMORANDUM OF DECISION

WILLIAM HILLMAN, Bankruptcy Judge

I. Introduction

In her Chapter 7 bankruptcy case, plaintiff Jennifer Gail
Brunell (“Debtor”) filed an adversary complaint
(“Complaint”) seeking the discharge of her educational
loans under 11 U.S.C. § 523(a)(8). Educational
Credit Management Corporation (“ECMC”) filed a motion to
intervene in this matter and I allowed ECMC to substitute
as defendant for Wells Fargo Education Financial Services
and Sallie Mae Servicing Corporation, and answer the
Complaint.[fn1] Page 2 Following discovery, and the
submission of pre-trial briefs and a Joint Pre-Trial
Memorandum (“JPTM”), I held a trial on September 27, 2006.
At trial, the Debtor and Becky Comery, a former co-worker
of the Debtor in her current industry, testified and
thirteen (13) exhibits were submitted into evidence without
objection. ECMC presented no witnesses and three (3)
exhibits were received into evidence. The issue presented
is whether the Debtor met her burden of establishing that
the repayment of her student loans would constitute an
undue hardship on her. The following constitute my findings
of fact and conclusions of law pursuant to Fed.R.Bankr.P.
7052.

II. Facts

A. Debtor’s Background and Current Income

The Debtor filed a voluntary case under Chapter 7 of the
Bankruptcy Code with her former husband on September 23,
2004 (“filing date”). JPTM 4. They received a general
discharge for all the eligible debts scheduled in their
bankruptcy petition on February 25, 2005, which would not
have included the student loan obligations for which she
now seeks discharge pursuant to the Complaint. JPTM 4. The
Debtor is forty-one (41) years old and currently a resident
of Tiverton, Rhode Island.[fn2] Trial Transcript (“Tr.”)
5-6. She is divorced and has custody of her three children,
a daughter age seven (7) and twin daughters age five (5).
JPTM 4; Tr. 7. The parties stipulated that the Debtor’s
health is good and that her assets are minimal. Page 3
JPTM at 5. She is intelligent and well-educated, and has
been gainfully and continuously employed in the health
services industry since August 2004.

For her education, she believes she borrowed approximately
$16,000 for her bachelor’s degree, $35,000 for her master’s
degree, and $45,000 to $50,000 for her Ph.D program. Tr. 16,
23. During this proceeding, the parties stipulated that
Debtor is indebted to ECMC, a student loan guarantor agency
and the current holder of amounts due under the Debtor’s
various student loan obligations (“student loan”). JPTM
4-5. The parties also stipulated that as of September 19,
2006, the amount due on the student loan totaled
$200,245.77, with a per diem of $33.46. JPTM 4; see also
ECMC’s statement of amount owed by the Debtor on the
student loan, Def.’s Ex. 1.[fn3] Over 30 years, payments of
at least $1,298.79 monthly would be required to repay this
debt. Id.

The Debtor’s substantial obligations under the student
loan arose in connection with her undergraduate studies
from 1983 through 1987, and graduate studies from 1993
through 2001. She obtained her bachelor’s degree in
electrical engineering from Worcester Polytechnic Institute
in 1987. Tr. 18. While she was in college, she funded her
education with scholarships, student loans and funds from a
part-time job, reflecting her intelligence and
resourcefulness. Response of Plaintiff to First Set of
Interrogatories Submitted by Educational Management
Corporation (“Interrogatory Answers”), Pl.’s Ex. 7 at 9.

The Debtor’s career in the engineering field prior to her
current career was just as promising as her current career
in the health services industry. In the summer after she
graduated from college, she worked as a systems engineer
with Teledyne Brown Engineering where she Page 4 worked
on building large computer systems for the government, and
earned a salary of approximately $30,000 annually. Tr.
51-52. After that office was closed, she was able to
immediately find another job with Mitre Corporation for a
similar position and salary. Tr. 52-53. Within only sixteen
months or so after starting the position at Mitre, she was
able to advance to an even higher paying job at GTE
Corporation in systems engineering, where she started at a
salary of $33,000 annually and worked for the following
five years. Tr. 53. During this time between 1990 and 1992,
she also attended single classes at Northeastern University
and Middlesex Community College which she paid for with
funds from her full-time employment. Interrogatory Answers,
Pl.’s Ex. 7, at 9.

After deciding to pursue her interest in psychology,
between 1993 and 2001, the Debtor returned to full-time
graduate study. In 1993, she commenced a master’s program
in counseling psychology at Lesley College, a degree which
she completed in 1995. Tr. 14-15. Within a year of
completing her master’s degree, the Debtor applied to Ph.D.
programs. Tr. 16, 18. She subsequently commenced a Ph.D.
program and did work towards her doctorate at Suffolk
University and the Fielding Institute between 1996 and
2001. Tr. 15. She paid for the cost of her master’s and
Ph.D. programs with student loans and support from her
husband. Interrogatory Answers, Pl.’s Ex. 7, at 10. It had
been her intention to earn her master’s and Ph.D. in order
to be able to change fields, and that her husband would
support the family while she worked to pay back her student
loans. Tr. 38.

After her first daughter was born in 1998, the Debtor
continued as a full-time Ph.D. student. Tr. 18. She dropped
out of her Ph.D. program in February 2001, four months
before her twins were born. Id. She and her husband
separated, and her husband filed for divorce in 2003. Page
5 Tr. 38. The divorce judgment indicates that they
separated in June 2003, and the divorce became final in
August 2005 after a little over seventeen (17) years of
marriage. Judgment of Divorce Nisi and Separation
Agreement, Pl.’s Ex. 12.

In August 2004, the Debtor started her employment at the
Attleboro Center — Community Care Services
(“Attleboro Center”). Tr. 19. At the Attleboro Center, the
Debtor worked with adolescents aged 12 through 18 during
their residence at an inpatient treatment center, as a
clinician. Interrogatory Answers, Pl.’s Ex. 7, at 3-4. Her
duties included the treatment of individuals, families and
groups, crisis intervention, case management and aftercare
services. Id. at 4. The parties stipulated in the JPTM that
her hourly pay at the Attleboro Center was $16.50 for 40
hours, but the Debtor testified that her compensation was
actually the amount of approximately $37,000 gross per
year, which would indicate an approximate hourly rate of
$17.79 (($37,000 ?· 52) ?· 40 = $17.788), and in her answers
to ECMC stated that she was paid hourly at a rate of
$17.89, amounts slightly higher than the $16.50 per hour
indicated in the stipulated facts. JPTM 4; Tr. 6;
Interrogatory Answers, Pl.’s Ex. 7 at 4. She worked for the
Attleboro Center from August 2004 to July 2005. Id. at 3.

From August 2005 to November 2005, the Debtor was employed
with South Bay Mental Health Services as a fee-for-service
staff therapist. Id. At this job, she also provided
individual and family counseling to a wide variety of
clients and managed caseloads. Id. She earned $30.00 per
contact hour at this position, but left this position when
she obtained her current employment which provided hourly
compensation. Id.

The Debtor has been employed since November 2005 with
Associates for Human Services Incorporated — Early
Intervention Program, in Taunton, Massachusetts
(“Associates”), Page 6 where she is currently employed as
a service coordinator and counselor. Id. In this position,
she manages caseloads of families with children up to 3
years of age with developmental delays. Id. When she
started her position, she was paid the amount of $35,000
annually, or the amount of $16.8269 hourly. Tr. 38; Letter
from Program Director to Jennifer Brunell dated November 1,
2005 and various paystubs from January through April 2006,
Pl.’s Ex. 8. Her compensation at this position also
includes a mileage and gas reimbursement. Tr. 41. As of
September 2, 2006, her year-to-date net pay, including the
mileage and gas reimbursement, was demonstrated to be
$22,531.80. Copy of year-to-date earning statement, Pl.’s
Ex. 2; Tr. 60-61. The copy of a letter dated September 12,
2006 provides information regarding the Debtor’s salary
since that date. Letter from Program Director of Associates
for Human Services, Pl.’s Ex. 13. The letter states that
the Debtor’s current salary is $17.50 per hour. Id.

In addition to the Debtor’s higher salary, the letter from
employer also indicates that the Debtor’s pay is subject to
annual increases, and that salaries within their
organization have been adjusted upwards by a factor of 1.5%
to 4% annually over the past four years, depending upon the
state’s budget for their organization. Id. The letter also
states that salaries in their organization are 25-35% lower
than that for individuals in hospital or school settings.
Id.

In her present industry, for someone with her educational
background, the Debtor testified to know the salary range to
be in the teens up to approximately $38,000. Tr. 38-39. To
be able to work in a setting with a higher pay, such as a
hospital, she would need to earn her License Mental Health
Counselor (LMHC) certification, which would require an exam
and certain experience over two years. Tr. 43-44. But she
testified that she believed she could not afford to go back
to school or enter a training certification process due to
the time and cost involved. Tr. Page 7 38-40, 65. She
testified that she likes her current job. Tr. 68. She has
not applied for second jobs because she believes she cannot
work any more hours than she currently does. Tr. 68-69.

In addition to the income from her current employment, the
divorce judgment with her ex-spouse requires payment of
child support to the Debtor in the amount of $176 per week,
and the submission of a percentage of additional amounts
for any commissions or bonuses that her ex-husband may
receive. Judgment of Divorce Nisi and Separation Agreement,
Pl.’s Ex. 12. The parties stipulated that she receives $704
per month in child support for all three children, which is
attached by the Massachusetts Department of Revenue from
her ex-husband’s pay. Tr. 29; Custodial Parent Notice of
Support Collections from Commonwealth of Massachusetts,
Pl.’s Ex. 8. The Debtor testified that she knows her
ex-husband’s employment history to be “poor,” and that
continued child support income may not be reliable. Tr. 31.
She testified that she receives no other parental or family
monetary assistance, and expects no inheritance. Tr. 25-26.

The Debtor testified that she has received around $4,000
to $5.000 each year for her tax refund since 2003. Tr.
23-24. Her tax return for 2003 indicates that she actually
received a joint refund with her husband for $1,070 for
that year.[fn4] Copies of federal tax returns for 2003
through 2005, Pl.’s Ex. 3. For 2004, her return indicates
that she received a refund of $4,918 for that year. Id. For
2005, her return indicates that she received a refund of
$4,284. Id. She also indicated that she has received food
stamps, cash assistance and other benefits in the past two
years, but testified that she was no longer receiving such
benefits because she works full-time. Interrogatory
Answers, Pl.’s Ex. 7 at 8; Tr. 42-43. Page 8

B. Debtor’s Current Liabilities and Expenses

In addition to the student loan, the Debtor submitted
various bills and collection notices due since the filing
of the bankruptcy. Various bills and collection notices,
Pl.’s Ex. 8; Interrogatory Answers, Pl.’s Ex. 7 at 7. In
her interrogatory responses to ECMC in April 2006, the
Debtor indicated that these approximate amounts included: a
loan of $4,000 from a friend for a retainer for a divorce
lawyer, $2,000 to her former landlord,[fn5] unpaid utility
bills of less than $2,000, amounts owed for previous child
care of $1,500 and minor medical bills of less than $500.
Interrogatory Answers, Pl.’s Ex. 7 at 7, 11. At trial, the
Debtor testified that she owed $200-$300 to her divorce
lawyer, $180 to her previous cable company and $365 to New
England Gas. She also stated that she owes her current
cable company $200-$360 and that her cable was pending
shut-off. Tr. 32-33. She testified that she could not
remember other bills that she had even though she knew that
she had them. Tr. 32. She also explained that she had to
pay over $300 to her ex-husband to save the greater expense
of going to court over the cost of past medical insurance
premiums. Tr. 28-29.

Her vehicle is a 1995 Mercury Villager purchased for
$4,000 about a year and a half ago using her tax refund for
that year. JPTM 5; Tr. 8-9, 24. The vehicle has about
120,000 miles on it, and its general condition is “not too
great,” but the Debtor currently needs to drive her car 200
to 250 miles per week for her current employment. Tr. 47.
She testified that she would use her next tax refund for
repairs to her car. Tr. 46. The Debtor also has a checking
account with an associated savings account at Citizens
Bank. As of the date of the trial, she testified that the
Page 9 balance in her savings account was $10, and the
balance in the checking account was $1,000. Tr. 13-14. She
has no retirement savings and is unable to afford such
plans that are offered through work. Tr. 26.

The Debtor has provided several different tabulations of
her claimed average monthly expenses over the course of
this proceeding. These amounts are summarized in the
following chart, as she indicated them to be at three
points in time — as of December 2004, Pl.’s Ex. 4;
as of April 2006, Interrogatory Answers, Pl.’s Ex. 7 at 12;
and as of August 2006, Pl.’s Ex. 5:

August 2006 April 2006 December 2004

Rent $850[fn6] $850 $1204

Gas no amount provided no amount provided $21.98

Electric no amount provided $50 $41.85

Cable, internet, phone $151.24 $60 telephone $112.64 cable

$43.98 telephone

AOL ISP $24.95 no amount provided $24.95

Cell phone $54.31 no amount provided $54.31

Storage unit no amount provided no amount provided $84.60

Gas for car $450 $303 $82.90

Repairs for car no amount provided $50

Clothing $125 $165 $124.11

Groceries $600 $175 $451.92

Medical — Doctors $25 $125 $84

Medical — Prescriptions $20 no amount provided
$52.62

RiteCare premiums $61 no amount provided no amount
provided Page 10

NationalGrid $88.38 no amount provided no amount provided

Day Care $600 $650 ($150 per week) $400

Car insurance $75.78 $108.33 ($1300 no amount provided
annual)

Cash/entertainment $100 $50 $51.60 cash

Meals outside no amount provided $86.67 ($20 per week)
$42.54 entertainment

Haircuts no amount provided $18.33 no amount provided

Holiday/birthday gifts no amount provided $70 no amount
provided

TOTAL $3,225.66 $2,761.33 $2,878

[fn6] Her lease agreement indicates that this amount
includes heat, hot water, sewer, trash and lawn care. The
lease reflects that it covers the period of February 1,
2006 through February 1, 2007, and a security deposit of
$850 was paid. Lease Agreement, Pl.’s Ex. 11.

The Debtor offered varying testimony as to the claimed
necessity of some of these expenses.

Her older daughter has asthma and younger daughter has a
condition called sensory integration dysfunction. Tr. 7. As
to costs for her younger daughter’s condition, she
explained that six-month check-ups with a neurologist were
recommended and that her daughter did not need to take any
special medication, although future therapy may become
needed. Tr. 7-8; Letter from Alan B. Silken M.D. regarding
Leia Brunell dated November 5, 2004, Pl.’s Ex. 10. The
Debtor also testified that she has an unspecified
out-of-pocket state health insurance cost for her and her
daughters for which she pays $122 a month. Tr. 13.

The Debtor stated that her ex-husband has visits with her
daughters for two hours on Wednesday night and every other
weekend from Friday to Sunday, and that she has her
daughters two weekends a month. Tr. 20. The Debtor
testified that she tries to do low-cost activities with her
children for entertainment, such as renting a movie,
getting a pizza or going apple picking. Id. Page 11

The Debtor pays daycare for her twins and also has before
and after school expenses for her oldest daughter. For all
three children, she testified that the cost of daycare is
$200 per week, or $2,400 per month. Tr. 21-22. She is not
able, however, to pay the entire cost of daycare, and pays
$600 per month to the woman who presently takes care of her
children. Id. She testified that the woman who takes care
of her children has been very kind to her, but believes
that she will have to pay the difference in costs
eventually. Tr. 22-23.

The Debtor pays for an internet expense. The expense is
part of her children’s entertainment and her various
personal use, though not specifically required for their
school or her work. Tr. 34.

The Debtor testified that her children have school
expenses, such as school supplies, backpacks, lunch boxes,
school pictures and items recommended by their teachers.
She testified that she had to spend a “whole bunch,” but
not every month. She guessed that this amount was $200 to
$250 total. Tr. 35. The Debtor foresees the school expenses
for her children increasing as they get older, for items
such as clothes, computers, calculators and notebooks. Tr.
36-37. The Debtor testified that she is unable to pay for
the expense to have her daughters participate in athletic
and other programs, including the $50 cost of a soccer
program for her oldest daughter. Tr. 35-36.

With respect to her student loans, the Debtor offered no
evidence that she has made any payments on the amounts she
borrowed, other than a vague recollection that she believed
she made some payments prior to returning to graduate
school. Tr. 17. She did, however, testify that she was
aware of the William D. Ford Direct Loan repayment program
sponsored by the United States Department of Education
(“Ford program”). She testified that she had attempted to
enroll Page 12 in the program, but had not heard anything
regarding the status of her application as of the date of
the trial and had not yet had the chance to call regarding
the program. Tr. 27-28, 66; Copy of the Debtor’s completed
Federal Direct Consolidation Loan application and cover
letter to the United States Department of Education dated
August 2, 2006, Pl.’s Ex. 6. ECMC provided the Debtor with
very detailed information regarding the Ford program,
together with their request for the Debtor to consider
consolidating her student loan in the Ford program. Copy of
a letter dated June 26, 2006 from counsel for ECMC to
counsel for the Debtor, Def.’s Ex. 2. Under the Ford
program, the Debtor would have four options with respect to
the repayment of her loan. Id. at 2. The first three
payment options provide for a payment ranging in between
$1,133.46 and $2,266.92. Id.

The fourth repayment option, known as the Income
Contingent Repayment Plan (“ICR Plan”), provides for a
monthly payment based upon the borrower’s annual income,
the total amount borrowed and family size. Id. These
payments can be as low as zero. Id. Since the payments
ordinarily would not be sufficient to cover the amount of
interest accruing on the loan, this amount would be added
to the principal balance only until 10% more than the
original principal balance is reached. Id. At that point
interest would continue to accrue but not be added to the
principal balance. Id. Her payment amount for each year
would be set based upon the adjusted gross income filed in
her annual return. Id. at 3. Upon enrollment in the Ford
program, the Debtor would also become eligible for
deferments or forbearance from making payments on her
student loan based upon negative changes to her financial
situation. Id. at 4. Based on the Debtor’s 2005 income of
$28,565, the ICR Plan payment amount would be $153.27. Id.
at Ex. 1. Based on a gross income of $35,000 for 2006, her
payment would be S260.83 per month. Id. at Page 13 Ex. 4.
At the end of the twenty-five year repayment period for the
ICR Plan, any remaining balance on the loan would be
canceled. Id. at 3.

III. Analysis

A. Applicable Law

Under 11 U.S.C. § 523(a)(8), an educational debt is
not dischargeable unless the debtor can establish that the
repayment of the debt would impose an undue hardship on the
debtor and the debtor’s dependents. 11 U.S.C. §
523(a)(8);[fn7] Smith v. Educ. Credit Mgmt. Corp. (In re
Smith), 328 B.R. 605, 610 (B.A.P. 1st Cir. 2005). There is
no dispute that the debts at issue in the Complaint fall
under the purview of 11 U.S.C. § 523(a)(8), the
parties having stipulated that the debts are for the student
loan currently held by ECMC. JPTM 4-5 It is therefore the
Debtor’s burden to prove by a preponderance of the evidence
that excepting the student loan from discharge will cause
the her and her dependents undue hardship. Smith, 328 B.R.
at 611.

Courts have used several tests to evaluate undue hardship
claims under 11 U.S.C. § 523(a)(8), including the
widely accepted “Brunner test” and the “totality of the
circumstances” test, which have been examined and described
in detail by previous courts. See Hicks v. Educ. Page 14
Credit Mgmt. Corp. (In re Hicks), 331 B.R. 18, 23-25 (Bankr.
D. Mass. 2005); Kopfv. United States Dep `t. of Educ. (In
re Kopf), 245 B.R. 731, 737-41 (Bankr. D. Me. 2000). In the
First Circuit, in the absence of controlling authority,
courts have been free to choose its own approach in
evaluating undue hardship. Kelly v. Educ. Credit Mgmt.
Corp. (In re Kelly), 312 B.R. 200, 206 (B.A.P. 1st Cir.
2004); see also Nash v. Conn. Student Loan Foundation et
al. (In re Nash), 446 F.3d 188, 190-91 (1st Cir. 2006)
(declining to adopt a preferred method for determining
undue hardship under 11 U.S.C. § 523(a)(8)). Many
courts within the First Circuit have adopted the totality
of circumstances test. See Hicks, 331 B.R. at 23-24; Kopf,
245. B.R. at 739-40. As I stated at trial and have so
stated previously, I employ the totality of the
circumstances test in evaluating undue hardship claims
under 11 U.S.C. § 523(a)(8). Tr. 49; In re Gharavi,
335 B.R. 492, 497 (Bankr. D. Mass. 2006). In so doing, I
will review all relevant factors and circumstances
surrounding a particular bankruptcy case. These factors
include a debtor’s past, present and reasonably reliable
future financial resources, and reasonable necessary living
expenses. Id.; Kopf, 245 B.R. at 738, 745-6. As Judge
Boroff did in Hicks, under the totality of circumstances
test, I essentially consider all of the factors relevant to
whether the Debtor can maintain herself and her dependents
now and into the reasonably foreseeable future while
repaying her educational debt. Hicks, 331 B.R. at 31.

B. Debtor’s Past, Present and Future Income

The record demonstrates that when the Debtor has sought
employment, she has consistently been able to obtain
employment. The Debtor was employed continuously from the
time she completed her college degree to the time she
returned to graduate school in 1993 in increasingly
responsible engineering positions. Tr. 51-53. Since
returning to the workforce in Page 15 2004, the Debtor has
similarly been continuously and progressively employed in
the health services industry. Interrogatory Answers, Pl.’s
Ex. 7 at 3-4.

Since August 2004, the Debtor has been employed with three
different employers. At the Attleboro Center from August
2004 to August 2005, the Debtor earned approximately
$37,000 annually, or $17.79 per hour. Tr. 6. At her
position with South Bay Mental Health Services from August
2005 to November 2005, she earned $30.00 per contact hour.
Interrogatory Answers, Pl.’s Ex. 7 at 3. With her current
employer, Associates, she earned $35,000 annually, or
$16.8269 hourly as of November 1, 2005, when she started
the position. Tr. 38. The record established that her
year-to-date net pay as of September 2, 2006, including the
mileage and gas reimbursement, as $22,531.80. Copy of
year-to-date earning statement, Pl.’s Ex. 2; Tr. 60-61. The
evidence indicates that the Debtor’s current salary is
$17.50 per hour. Letter from Program Director of Associates
for Human Services, Pl.’s Ex. 13; Year-to-date earning
statement, Pl.’s Ex. 2 (showing bi-weekly gross pay of
$1,399.99 for pay periods since June 29, 2006). Based upon
the steadiness of her past and current employment, I find
that it is reasonable to expect that the Debtor will
continue to be steadily employed and advance in her chosen
profession into the future.

As to her current income from employment, the parties
arrive at differing figures. ECMC argues that the Debtor’s
net monthly income as of September 2, 2006, is $2,816,
dividing $22,531.80 roughly, by the eight months that had
passed in 2006 as of that date. Tr. 61; Def’. `s Post Trial
Memorandum at 2. On the other hand, the Debtor argues that
the Debtor’s monthly income is merely $2,155.74, apparently
the bi-weekly net amount multiplied by two. Trial Brief of
Pl. at 19. Both are incorrect, as ECMC uses an
overinclusive calculation, and the Debtor uses Page 16 a
method which results in an understated monthly net income
amount. See In re Harden, 351 B.R. 643, 649 (Bankr. C.D.
Ill. 2006) (monthly income computed on two bi-weekly
paychecks understates monthly income).

The correct calculation must take into account the actual
time periods elapsed as of the time in consideration. Since
September 2, 2006 reflected the end of the 18th bi-weekly
pay period of the year, her average year-to-date net pay at
her current job as of that date was $1,251.77 bi-weekly
($22,531.80 ?· 18). Further, since there are fifty-two (52)
weeks in a year, there are twenty-six (26) bi-weekly pay
periods in that time, and each month of the year has 2.1667
bi-weekly pay periods (26 ?· 12). As a result, the Debtor’s
true net monthly income as of September 2, 2006 was
$2,712.20 monthly ($1,251.76 ?— 2.1667). Harden, 351 B.R. at
649 (computing monthly income accurately would be reflected
in utilization of 4.3 weekly periods per month (i.e.
2.1667 bi-weekly pay periods)); see also Smith, 328 B.R. at
612 (using figure of 4.3 weeks per month to determine
correct amount of monthly income). I will use the figure of
$2,712.20 as the Debtor’s net monthly income.[fn8]

Since the parties stipulated that she receives $704 per
month in child support for all three Page 17 children, I
include this amount in her current monthly income. Tr.
29.[fn9] Besides her mere belief that her husband’s
employment history is poor and unreliable, the Debtor
provided no evidence that there has been any interruption
in the receipt of this amount. Id. However, because this
amount is attached by the Massachusetts Department of
Revenue (“MDOR”) from her ex-husband’s pay, I find it
reasonable to expect that this amount will continue. Id.

Between her current employment and child support, the
Debtor’s net income per month is at least $3,416.20
($2,712.20 + $704). In addition, the evidence demonstrates
that the Debtor received tax refunds of $4,918 in 2004 and
$4,284 in 2005. Copies of federal tax returns, Pl.’s Ex. 3;
Tr. 23-24. ECMC argues that this amount should be included
in the Debtor’s income because she testified that she
expects to receive a tax refund next year Def.’s Post-Trial
Memorandum at 2-3. However, I will not reach the question
of how much of her tax refund should be budgeted into her
income in this case because the reason for these large tax
refunds was not established, and therefore I am unable to
determine how reliable the receipt of refunds would be
continuing into the future.

Assuming for the moment that her expenses are $3,225.66 as
indicated in her budget of August 2006, see Pl.’s Ex. 5,
the difference from her income of $3,416.20 is $190.54.
ECMC has offered evidence that establishes that based on
the Debtor’s 2005 income of $28,565, the ICR Plan payment
amount would be $153.27. Def.’s Ex. 2 at Ex. 1. Based on a
gross income of Page 18 $35,000 for 2006, her payment
would be $260.83 per month. Id. at Ex. 4. Her ICR Plan
payment amount for each year would be set based upon the
adjusted gross income filed in her annual return. Id. at 3.
It is evident that the Debtor’s income for 2006 may
actually be higher than estimated, and that its amount into
the future will continue to increase, thereby increasing
her required minimal payment under the ICR Plan to an
amount that exceeds her current disposable income. However,
just because a debtor’s present income may be insufficient
to pay expenses necessary to maintain even a minimal
standard of living does not automatically entitle a debtor
to a discharge of their student loans. See Burkhead v.
United States of America and Educ. Credit Mgmt. Corp. (In
re Burkhead), 304 B.R. 560, 566 (Bankr. D. Mass. 2004);
Bloch v. Windham Prof’l, Suffolk University et al. (In re
Bloch), 257 B.R. 374, 377-78 (Bankr. D. Mass. 2001).
Rather, a debtor must also demonstrate that a debtor’s
prospects for increasing future income are so bleak as to
warrant a discharge of student loans. Smith, 328 B.R. at
611; Educ. Credit Mgmt. Corp. v. Savage (In re Savage), 311
B.R. 835, 839-40 (B.A.P. 1st Cir 2004); Burkhead, 304 B.R.
at 566; Bourque v. Educ. Credit Mgmt. Corp. (In re
Bourque), 303 B.R. 548, 550 (Bankr. D. Mass. 2003).
Financial adversity alone is not sufficient to have a
student loan debt discharged on the basis of undue
hardship. Bourque, 303 B.R. at 550.

While the Debtor’s current level of income might not be
sufficient to make payments, based on her employment record
and pay increases since just 2004, the evidence
demonstrates that the Debtor’s prospects for a steady
increase in income over time are promising, which is a
relevant consideration. Savage, 311 B.R. at 840. The
Debtor’s pay is subject to increase, as demonstrated by her
salary, which has increased each year, since she reentered
the workforce in 2004. See Copies of tax returns for 2003
through 2005, Pl.’s Ex. 3; Interrogatory Answers, Pl.’s
Page 19 Ex. 7 at 3-4. Her pay is also subject to the annual
upward adjustments by her organization, which was reported
to be 1.5% to 4% annually. See Letter from Program Director
of Associates for Human Services, Pl.’s Ex. 13. Her
ex-spouse is also required to pay to her a percentage of
additional amounts for any commissions or bonuses that he
may receive. Judgment of Divorce Nisi and Separation
Agreement, Pl.’s Ex. 12.

Further, the Debtor is bright, well-educated and only 41
years of age, and will have the opportunities to increase
her income as her children get older. Courts have not
discharged the student loans of debtors who have the
reasonable likelihood of future opportunities to increase
income, even for debtors who have the responsibility of
raising children. See, e.g., Smith, 328 B.R. at 612
(reversing findings of lower court which discharged
debtors’ student loans based on future prospects for an
increase in debtors’ income as their child got older);
Savage, 311 B.R. at 840 (reversing findings of lower court
which discharged debtor’s student loans based on increasing
practicality for part-time work or longer hours at job as
her son grew older); Bourque, 303 B.R. at 550 (finding no
reason that the debtor could not work more hours to obtain
funds for her student loan payments once her child began
school). The Debtor argued that her expenses for her
children will only increase. Tr. at 36-37. However, the
Debtor offered no evidence as to what those additional
expenses would be, or why she would not be able to work
additional hours as her children grow older. I find that
this Debtor does have the reasonable likelihood of such
future opportunity for additional pay. Her successful
employment in the health services industry since August
2004, and her steady advance in responsibility and pay
since that time, makes evident that she uses skills
obtained from her education daily, and that her education
will continue to serve her well. In further consideration
of the Debtor’s demonstrated resourcefulness Page 20 and
intelligence, her options of pursuing secondary or higher
paying employment, or pursuing further certification in her
field must be considered to be options for her, if not at
this time, in the future, as her children get older.

C. Debtor’s Reasonably Necessary Expenses

ECMC does not take issue with the Debtor’s expenses, with
the exception of questioning the necessity of the $122
out-of-pocket medical expense for state health care
coverage for herself and her children that the Debtor
testified to at trial. Tr. 13; Def.’s Post Trial Memorandum
at 3. ECMC did not contest the Debtor’s estimated $250
total for a one-time school expense. Averaged over 12
months, at most this comes to an additional $20.83 per
month. Since the Debtor’s budget for August 2006 already
includes four amounts for medical expenses, doctors for
$25, prescriptions for $20, RiteCare premiums for $61 and
NationalGrid for $88.38, I will assume that the $122 is
reflected in these expenses since it has not been shown
otherwise. See Pl.’s Ex. 5. As a result, I find that the
Debtor has offered that her expenses are currently
approximately $3,246.49.

The Debtor’s expenses are not outrageous or extravagant.
However, despite this, she has not demonstrated that all of
her expenses are necessary. A necessary expense is one that
the debtor cannot cut from the budget while maintaining a
minimal standard of living. Smith, 328 B.R. at 612-13
(citing Savage, 311 B.R. at 841). Here, her claimed
expenses have fluctuated, in just the past year, from
$2,761 in April 2006 to $3,246.49 in August 2006, a time
period during which her income level did not change. While
I do not find that her expenses in any particular category
are necessarily lavish or unreasonable, I do find that she
has been able to adjust her expenses to amounts between
$2,761 and $3,246, and provide for herself and her
family’s Page 21 necessary expenses. Accordingly, I find
that it is not unreasonable that the Debtor be required to
cut her expenditures, even if just a bit, to the small
extent necessary in order to be able to make the minimal
payments towards her student loan obligations under the ICR
plan. See, e.g., Bourque, 303 B.R. at 551. Based on the
Debtor’s 2005 income of $28,565, the ICR Plan payment
amount would be $153.27. Def.’s Ex. 2 at Ex. 1. Based on a
gross income of $35,000 for 2006, her payment would be
$260.83 per month. Based on a gross income of $38,000, her
estimated monthly payment would be around $300. Using her
current available disposable income of $190.54, the Debtor
would need to cut her expenses by approximately $70 to $110
in order to be able to make payments on the student loan. I
find that this is a reasonable requirement in order to be
able to manage her student loan obligations and qualify for
the favorable treatment of the ICR Plan.

D. Other Relevant Facts or Considerations

The Debtor has not demonstrated any other unusual medical
or other factors which would militate another conclusion.
Her youngest daughter’s check-ups can be conducted every
six months and no medication is required. Tr. 7-8; Letter
from Alan B. Silken M.D. regarding Leia Brunell dated
November 5, 2004, Pl.’s Ex. 10. Her budget otherwise
includes amounts for her co-payments, prescriptions and
insurance amounts. See Pl.’s Ex.5. The Debtor’s own health
is good. JPTM 5.

Also, while she testified to having outstanding bills to
pay, the record demonstrates that the balances on many of
these bills were reduced from just April 2006 to August
2006. Compare Interrogatory Answers, Pl.’s Ex. 7 at 7, 11
with Tr. 32-33. This further demonstrates that the Debtor
is resourceful and pays her bills as she is able. With
respect to needed repairs for her car, Page 22 she
testified that she will use her tax refund to pay for that,
but obviously any such funds received would and should be
available for the reduction of bills as well. Tr. 45. The
Debtor is also holding $1,000 in her checking account that
could and should also go towards her bills if not towards
her living expenses. Tr. 13-14.

I am not unsympathetic to the Debtor’s difficulty in
raising three children while working full-time. But because
her current income and expenses necessary to provide for
herself and her children, with some small adjustments to
her expenses, demonstrate that she holds a surplus from
which a monthly payment toward her student loan obligations
can be made, I do not find that she face an undue hardship
should she be required to pay her student loan.[fn10] In
addition, I find that the Debtor’s future income prospects
also support this finding, as she is bright and
well-educated, and will have more opportunities to increase
her income as her children get older.

In addition, should something drastic happen in her
circumstances, such as child support cease for a period of
time, the ICR Plan under the Ford program also allows for
forbearance and deferments, and the discharge of any
remaining liability should she participate in the plan for
25 years. Def.’s Ex. 2 at 3-4. The Debtor expressed concern
about any tax liability for forgiven debt at the end of the
repayment period. Trial Brief of Pl. at 10. To the extent
that the Debtor’s situation has not improved to allow for
the full repayment of the debt by the end of the repayment
Page 23 period, the debt will have negatively amortized
over time to be many times the amount of the original
principal balance. I conclude that the payment of tax on
any gross income imputed to the Debtor, from any amount of
student loan debt forgiven, would impose an undue burden on
the Debtor, and hence be dischargeable. See Austin v. Educ.
Credit Mgmt. Corp. et al. (In re Austin), No. 03-18868-WCH
(Bankr. D. Mass. October 19, 2005). I agree with the
several courts that have found that forecasting the precise
amount or existence such a tax liability is speculative.
See Burton v. Educ. Credit Mgmt. Corp. (In re Burton), 339
B.R. 856, 889 n. 48 (Bankr. E.D. Va. 2006); Educ. Credit
Mgmt. Corp v. Stanley (In re Stanley), 300 B.R. 813, 818 n.
8 (Bankr. N.D. Fla. 2003). However, I do not need to
forecast the exact amount of tax liability to conclude
that, to the extent that the Debtor is obligated under any
tax liability as may exist under the tax laws in effect at
that time, the presence of any such liability at the end of
one’s working life would be a tremendous undue hardship
incurred as the result of the student loan.

Finally, should ECMC not approve her application for the
Ford program or provide the Debtor an alternate affordable
payment plan, or subject her wages or tax refunds to
garnishment during the repayment period such that the
Debtor is unable to subsist and care for her children, I
would consider another request for discharge of the student
loans and review of the Debtor’s situation pursuant to the
Debtor’s properly renewed request at that time. See Nash,
446 F.3d at 194; 11 U.S.C. § 523(b);[fn11] Storey v.
Nat’l Enter. Sys. (In re Storey), 312 B.R. 867, 875 (Bankr.
N.D. Ohio) (noting that a decision as to the
nondischargeability of a student loan obligation is not
Page 24 res judicata).

IV. Conclusion

For the reasons set forth herein, I will enter an order
granting judgment for ECMC. To the extent that the Debtor
satisfies the requirements for participation in the Ford
program, any tax liability based on the forgiven balance at
that time is discharged. A separate order will enter.

[fn1] I allowed the original Complaint to be amended to
correct an original party defendant and add two additional
party defendants. Several of these defendants, Citibank
(South Dakota) N.A., Chemical Bank Educational Financial
Group and Sallie Mae Servicing Corporation, did not respond
to the Complaint and default judgments were entered against
each. The default judgment entered in this matter against
Sallie Mae Servicing Corporation apparently is separate
from the interest of Wells Fargo Education Financial
Services, the former holder of the loan that is the subject
of this Complaint.

[fn2] The Debtor had resided in Plainville, Massachusetts as
of the filing date.

[fn3] By agreement with ECMC, the Debtor reserved the right
to contest any other issue concerning the student loan,
aside from dischargeability, with respect to any whole or
part of the student loan that may not be excepted to
discharge. Id.

[fn4] The amount reflected as received for the joint 2003
tax refund is different from the $768 she listed in her
interrogatory responses to ECMC. Interrogatory Answers,
Pl.’s Ex. 7 at 8.

[fn5] The Debtor testified that she was evicted from her
former apartment in Plainville, Massachusetts, and she
believed to owe the amount of $1,900 to $2,000 in back rent
to her former landlord. Tr. 12, 31.

[fn7] Section 523(a)(8) was amended with the changes put
into effect under the Bankruptcy Abuse Prevention and
Consumer Protection Act (“BAPCPA”) on October 17, 2005.
Since this case was filed on September 23, 2004 before the
effective date of BAPCPA, however, the version of 11 U.S.C.
§ 523(a)(8) in effect as of that date is applicable.
Section 523(a)(8) provided pre-BAPCPA, in relevant part:

A discharge under section 727 . . . of this title does
not discharge an individual debtor from any debt . . . for
an educational benefit overpayment or loan made, insured
or guaranteed by a governmental unit, or made under any
program funded in whole or in part by a governmental unit
or nonprofit institution or for an obligation to repay
funds received as an educational benefit, scholarship or
stipend, unless excepting such debt from discharge under
this paragraph will impose an undue hardship on the debtor
and the debtors dependents . . .

[fn8] Using the Debtor’s higher salary of $17.50 per hour
does not yield a significant difference from the above
figure, for some reason. Once the mileage reimbursement is
subtracted, averaged over eighteen weeks, and added back
into the new bi-weekly net income figure, the average
bi-weekly net comes to almost the same amount, $2,710.63.

I determine the Debtor’s year-to-date mileage reimbursement
and new monthly net income by deducting the net pay without
mileage reimbursement from her total net pay as of
September 2, 2006, using the figures provided in Pl.’s Ex.
2: $22,531.80 ? ($1,383.84 ?— .79) ? ($1,837.49
?— .79) ? ($1,077.86 ?— 11) ? ($1,106.78 ?— 5) =
$2,596.59. This amount, averaged over eighteen bi-weekly
pay periods is $144.26 per bi-weekly pay period ($2,596.59
?· 18). Using the above figures, the Debtor’s new average
current bi-weekly pay is $1,106.78 + $144.26 = $1,251.07.
Her average net monthly pay therefore is approximately
$2,710.63 ($1,251.07 ?— 2.1667).

[fn9] The divorce judgment and separation agreement provides
that her ex-spouse is to pay the amount of $176 per week.
Judgment of Divorce Nisi and Separation Agreement, Pl.’s
Ex. 12. Since the parties have stipulated that $704 is the
amount that the Debtor receives in child support each
month, I will accept this figure. JPTM 4. However, the
correct monthly calculation of $176 weekly would ordinarily
result in a monthly figure of $176 ?— 4.3 = $757, not the
$176 ?— 4 = $704 stipulated by the parties. See Harden, 351
B.R. at 649.

[fn10] The Debtor did not raise a request for the
possibility of a partial discharge of the student loan,
although ECMC did in its brief, in the event that the Court
found fit. See Def.’s Trial Memorandum at 41-46. But
because bankruptcy courts in the First Circuit have
determined that a finding of undue hardship is a
prerequisite for granting a partial discharge, I will not
consider whether a partial discharge is appropriate in this
case since I do not find that the Debtor met her burden of
establishing undue hardship. See Paul v. Educ. Credit Mgmt.
Corp. (In re Paul), 337 B.R. 730, 738-39 (Bankr. D. Mass.
2006); In re Lamanna, 285 B.R. 347, 353 (Bankr. D. R.I.
2002); In re Coutts, 263 B.R. 394, 401 (Bankr. D. Mass.
2001).

[fn11] Section 523(b) provides, in relevant part:
“Notwithstanding subsection (a) of this section, a debt
that was excepted from discharge under subsection (a)(1),
(a)(3), or (a)(8) of this section . . . in a prior case
concerning the debtor under this title . . . is
dischargeable in a case under this title unless, by the
terms of subsection(a) of this section, such debt is not
dischargeable in the case under this title.” 11 U.S.C.
§ 523(b).