Zook v. U.S. Dept. of Education et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
PAMELA S. ZOOK,
Debtor.
____________________________
PAMELA S. ZOOK,
Plaintiff,
v.
EDFINANCIAL CORP., et al.,
Defendants.
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Case No. 05-00083
(Chapter 7)
Adversary Proceeding No.
05-10019
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION
The plaintiff, Pamela S. Zook, filed a complaint seeking to
have her student loan debts discharged. 	This decision,
constituting the court’s findings of fact and conclusions of law,
concludes that Zook is entitled to have the debts discharged.
Zook has proceeded in good faith to attempt to pay her student
loan debts, but due to a medical condition beyond her control she
is and will be unable to pay them if she is to address her
The document below is hereby signed.
Signed: February 27, 2009.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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1 	See Educ. Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302,
1309 (10th Cir. 2004); In re Saxman, 325 F.3d 1168, 1173 (9th
Cir. 2003); In re Cox, 338 F.3d 1238, 1241 (11th Cir. 2003); In
re Gerhardt, 348 F.3d 89, 91 (5th Cir. 2003); Goulet v. Educ.
Credit Mgmt. Corp., 284 F.3d 773, 777 (7th Cir. 2002); In re
Brightful, 267 F.3d 324, 327 (3d Cir. 2001). 	See also In re
Hornsby, 144 F.3d 433, 437 (6th Cir. 1998) (recognizing the
significance of the Brunner factors, but also considering any
other factors deemed relevant in a particular case).
2
medical condition appropriately and to maintain a minimal
standard of living. 	Zook suffers from a severe bipolar affective
disorder that interferes with her capacity to function at work
and otherwise, and that leads to periodic severe episodes of
depression during which she is essentially unable to function at
all. 	This leaves her unable to earn an income at a level that
will permit her to maintain a minimal standard of living and make
payments on the student loan debt. 	Accordingly, as discussed in
greater detail below, the debts are dischargeable pursuant to 11
U.S.C. § 523(a)(8) as imposing an undue hardship on Zook.
I
Student loan debts of the types involved in this case are
nondischargeable “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 majority of
courts, including this one, have adopted some form of the “undue
hardship” standard as defined in Brunner v. New York State Higher
Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987). 1 	To prove
an undue hardship, the Brunner standard requires that a debtor
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2 	Under that standard, a court considers: “(1) the debtor’s
past, present, and reasonably reliable future financial
resources; (2) a calculation of the debtor’s and her dependent’s
reasonable necessary living expenses; and (3) any other relevant
facts and circumstances surrounding each particular bankruptcy
case.” 	In re Long, 322 F.3d at 554 (internal citations omitted).
3
show three things:
(1) that the debtor cannot maintain, based on current
income and expenses, a “minimal” standard of living for
herself and her dependents if forced to repay the
loans; (2) that additional circumstances exist
indicating that this state of affairs is likely to
persist for a significant portion of the repayment
period of the student loans; and (3) that the debtor
has made good faith efforts to repay the loans.
Brunner, 831 F.2d at 396. 	I agree with In re Polleys, 356 F.3d
at 1309, that “the good faith portion of the Brunner test should
consider whether the debtor is acting in good faith in seeking
the discharge, or whether he is intentionally creating his
hardship.” 	A court must find in favor of the debtor on all three
inquiries to discharge the education loan. 	Brunner, 831 F.2d at
396.
The other notable “undue hardship” standard is the totality-
of-the-circumstances standard, which has been adopted by the
United States Court of Appeals for the Eight Circuit. 	In re
Long, 322 F.3d 549 (8th Cir. 2003). 2 	Accord, In re Andresen, 232
B.R. 127, 140 (B.A.P. 8th Cir. 1999). 	I conclude that the
Brunner test generally sets forth the more appropriate test for
reasons discussed in In re Polleys, 356 F.3d at 1308-09. 	I will
apply the Brunner test, but there are no facts or circumstances
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that would alter the outcome under the “totality-of-the-
circumstances” test. 	Under either test, Zook has established
that the debts here are dischargeable.
As I have opined in the past, there are three qualifications
to the Brunner test. 	None of those qualifications alter the
outcome here.
First, Brunner is not an all-or-nothing proposition. 	If the
debtor will have the ability to pay part of the debt in the
future, applying the Brunner test to that part of the debt ought
to make it nondischargeable.
Second, if the debtor is currently unable to pay the debt
and the Brunner test is otherwise met except that the debtor has
shown a future inability to pay for only a finite period, the
debt ought to be dischargeable during that finite period. 	In
other words, if a debtor fails only the second Brunner
requirement because after the passage of a finite period of time
he likely will be able to pay the debt, he should not be
discharged from the loan in toto because future prospects
indicate he may be able to repay it later; in such a case, a
deferral of payment (a temporary discharge of the debt) is the
appropriate remedy.
Finally, limiting the forecast of the debtor’s inability to
pay to “a significant portion of the repayment period of the
student loans,” as mandated by Brunner, is obsolete. 	The current
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version of § 523(a)(8) makes no provision for a student loan debt
to become dischargeable, without a showing of undue hardship,
after the passage of a set number of years. 	The version of
§ 523(a)(8) that applied in Brunner made the student loans
dischargeable after five years (without a showing of undue
hardship), and it is that five-year period that Brunner must have
had in mind. 	See In re Polleys, 356 F.3d at 1307 n.2. 	It makes
no sense, for example, that if the remaining repayment term for a
student loan is only one year, the debt can escape discharge even
though the record demonstrates that in three years the debtor
will have the ability to pay the entire debt. 	Indeed, Brunner
itself recognized that the forecast of future inability to pay
should be over an extended period of time. 	See In re Brunner,
831 F.2d at 396 (“Requiring evidence not only of current
inability to pay but also of additional, exceptional
circumstances, strongly suggestive of continuing inability to
repay over an extended period of time, more reliably guarantees
that the hardship presented is ‘undue.’”). 	I agree with In re
Polleys that “the inquiry into future circumstances should be
limited to the foreseeable future” (which equates to the extended
period of time that Brunner envisioned), but I disagree with its
observation, in dicta, that the foreseeable future should be “at
most over the term of the loan.” 	In re Polleys, 356 F.3d at 1310
(citation omitted).
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II
Starting in 1989, Zook attended the University of Texas to
study for an undergraduate degree. 	In her sophomore year, Zook
withdrew from the university while suffering from an onset of
severe depression, and had to be cared for by her father. 	Four
years later, she re-enrolled at the University of Texas and
completed her undergraduate degree in 1997. 	During 1998 to 2000,
she took pre-med courses at the same university.
In August 1994, she took out her first student loan to
finance her education at the University of Texas. 	She took out
additional student loans in 1995 and 1999 for that purpose.
Beyond the student loans incurred in attending the
University of Texas that Zook seeks to discharge, Zook incurred
additional student loan debts in attending medical school. 	Zook
was admitted to Georgetown University School of Medicine and
began attending that school in the fall of 2001. 	She took out
the remaining student loans at issue here in 2001 and 2002 to
finance that education.
During her first semester in medical school, she took a
leave of absence due to her depression. 	She began anew in 2002,
but each semester she failed one-third of her courses and was
unable to successfully stay in medical school due to recurring
periods of depression. 	During a portion of that period, Zook was
homeless because she was unable to sustain employment in her
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depressive state.
III
As established by the testimony of Dr. Todd S. Cox, who
testified as an expert and also as Zook’s treating physician,
Zook suffers from bipolar affective disorder. 	Zook suffers from
a severity of the disease that is rare. 	This disorder manifests
itself in a variety of ways, including changes in mood, in energy
and motivation, in sleep and appetite, and in self-image and
processing one’s environment. 	She suffers from a lack of self-
worth, due in part to her inability to complete her medical
education. 	The student loan debts hanging over her head are a
reminder of that inability.
Zook’s depressive state manifests itself in a complete lack
of motivation and energy, an inability to focus, and a feeling of
intense hopelessness. 	During periods of severe depression, Zook
struggles with even basic functioning and is unable to fulfill
day-to-day activities. 	During the last such episode, her
depression was severe and required full-time hospitalization. 	At
one point she suffered an episode during which she received
electroshock therapy, a treatment that is reserved for the most
severe cases. 	Zook requires an array of prescription medications
to address her disease (and the services of a prescribing
physician), but because the disease is not curable, she requires
psychotherapy as an additional necessary component of treating
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her disease.
Her depressive episodes are particularly difficult for Zook
because Zook lacks a support network of family or close friends
who could assist her in functioning through her depressive
periods. 	As a result, Zook is unable to maintain any aspect of
her life during these periods, and must start her professional
and personal life over after each episode, and her recuperative
phase after such an episode takes longer than for a patient with
greater supports.
At the time of the trial, Zook was currently in a recovery
period from a depressive episode that lasted about a year and a
half. 	Zook’s bipolar condition cannot be cured; her treatment is
an attempt to educate her on how to better manage her condition
and avoid triggers in her life which will increase the likelihood
or severity of a depressive episode. 	Zook’s primary triggers
include her failure in medical school, her loans (which are tied
to her failure in medical school), and her fear that she will
become homeless again when she has another depressive episode and
is unable to work. 	Her inability to afford the full extent of
the treatment she needs due to her financial condition similarly
leads to stress that can be a trigger for severe episodes of
depression.
Although it is impossible to predict the future for any
given patient, based upon statistics of patients suffering from a
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bipolar disorder, it is highly likely and almost guaranteed that
Zook will have future episodes of severe depression. 	As Zook
gets older, her condition will become more severe, and thus
depressive episodes will be more frequent and more severe, and
the periods of time during which she will be well will be
shorter.
Even in her current condition (of recovering from and not
being in the midst of a severe depressive episode), Zook is
unable to function in a normal way. 	She is unable to cook for
herself other than spaghetti, TV dinners, and microwaved foods,
adding to her at-home and at-work food expenses. 	Her medications
cause her fatigue; she suffers from extreme concentration
difficulties; and her memory and word finding abilities are
impaired.
Her ability to stay in jobs in the past has been miserable.
For example, she failed as a bookseller at a retail book store,
and she failed as a telephone receptionist at another company.
She performs poorly in her current position: she acknowledges
that she has difficulty following directions, she often tunes
out, and she gets yelled at. 	Because of her illness, she
occasionally misses work and has a lot of unpaid leave. 	Given
her lack of capacity to function at a high level, it is amazing
that she is still employed.
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Zook’s disease makes it difficult for her to develop
friendships, to develop relationships, and to live with others.
For days and weeks on end she often has a feeling of a need to
stay at home and not venture out.
In addition to bipolar affective disorder, Zook also suffers
from Ehlers-Danlos Syndrome (a genetic, connective tissue
disorder), asthma, and allergies. 	When she suffers sinus
infections, that can worsen her ability to cope with her bipolar
affective disorder.
IV
As previously stated, under the Brunner standard, a debtor
must show that (1) he or she cannot maintain a “minimal” standard
of living if forced to pay the education loans; (2) additional
circumstances exist such that for an extended period of time he
or she will be unable to repay the loans in the future; and, (3)
he or she has made good faith efforts to repay the loans. 	See
Polleys, 356 F.3d at 1309-10; Brunner, 831 F.2d at 396.
A.
MAINTENANCE OF A “MINIMAL” STANDARD OF LIVING
The first Brunner inquiry is whether the debtor currently
lacks the financial means and ability to repay the education debt
while maintaining a minimal standard of living for him or
herself. 	See Polleys, 356 F.3d at 1309-10; Brunner, 831 F.2d at
396. 	This inquiry requires consideration of the amount of the
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debtor’s education loan payments; the debtor’s current income;
and household, medical, and other expenses, and the
reasonableness of those expenses. 	The debtor need not live in
poverty in order to satisfy the first inquiry, but neither is the
debtor sheltered from making some personal and financial
sacrifices in order to repay the debt. 	See, e.g., In re Howe,
319 B.R. 886, 889-90 (B.A.P. 9th Cir. 2005); In re Faish, 72 F.3d
298, 305 (3d Cir. 1995); In re Kelly, 351 B.R. 45, 53 (Bankr.
E.D.N.Y. 2006). 	Put another way, “a minimal standard of living
is a measure of comfort, supported by a level of income,
sufficient to pay the costs of specific items recognized by both
subjective and objective criteria as basic necessities.” 	Ivory
v. United States (In re Ivory), 269 B.R. 890, 899 (Bankr. N.D.
Ala. 2001).
The defendants are Texas Guaranteed Student Loan Corp.
(“TGSLC”) and Educational Credit Management Corporation (“ECMC”)
(collectively, “Defendants”). 	Zook owes TGSLC $27,595.65 as of
January 17, 2006, as debt she incurred prior to medical school.
(Trial Exhibit M, p. 4.) 	Zook owes ECMC $44,861.19 as of October
3, 2006, as debt incurred during medical school. 	(Defendants’
Post Trial Memorandum, DE No. 49, p. 3.) 	At the April 23, 2007
trial, Zook testified that she owed approximately $76,000 total
(the sum of the TGSLC and ECMC debts). 	At an interest rate of
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3 	Defendants represented that the ECMC interest rate was
7.14% per annum, but did not expressly provide the interest rate
for the TGSLC debt. 	(See DE No. 49, pp. 2-3.) 	For the present
calculations, the 7.14% rate will be used for both loans.
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7.14% per annum, 3 a $76,000 debt would increase by $5,426.40 the
first year, and would continue to increase.
Zook’s gross salary in 2007, up to and including the date of
trial (April 23, 2007), was $60,486.48 annually, or $5040.54 per
month. 	(Direct Deposit Advice Slip, dated March 26, 2007, Trial
Exhibit O.) 	This equates to a monthly net income of $3,469.62.
(Id.) 	Zook had been receiving approximately $860 per month in
Social Security disability benefits, but she received
correspondence from the Social Security Administration that she
would no longer receive that money because she had maintained
employment for a fifteen month period.
In 2006, Zook earned $54,219 salary from employment, and
received $7,902 in social security benefits. 	(Form 1040, U.S.
Individual Income Tax Return - 2006, Trial Exhibit N.) 	But in
previous years, Zook’s employment was sporadic. 	Zook reported
gross income of $11,893 in 2004; -$11.00 in 2003; $715 in 2002;
$29,337.00 in 2001; and, $15,710 in 2000. 	(Zook’s Response to
Interrogatories, Trial Exhibit K, p. 8.) 	Zook’s reported gross
income for 2005 was not put into evidence. 	But in 2005, Zook
earned monthly gross income of only $960 as a technical writer
until July 11, 2005. 	She was unemployed from July 11, 2005 to
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November 2005, and became unemployed again in December 2005.
The amount of Zook’s total monthly expenses are in dispute.
At the trial, Zook quantified the following monthly expenses:
Rent: 	$1,187
Electricity: 	75
Therapy sessions with Dr. Todd Cox: 	280
Groceries, laundry, eating in restaurants: 	600
Medications and supplements 	400
Cellular telephone service 	35
Cable television, internet, and home
telephone service 	140
Automobile insurance 	120
Renter’s insurance 	30
Entertainment expenses 	50
Cat food 	10
Gasoline 	150
Clothing 	150
Total Monthly Expenses: 	$3,227
Defendants have put forth a considerably lower estimate of
$2,432. 	(DE No. 49, p. 5.) 	Upon review, it is clear that
Defendants’ lower estimate understates or does not include
several necessary expenses.
First, Defendants do not include the $280 per month for
therapy sessions with Dr. Cox. 	Zook testified that she sees Dr.
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Cox twice a month, and Dr. Cox charges $200 per hour, with
insurance covering only $60 per hour. 	Zook did not make clear
how long each session with Dr. Cox lasts, but assuming that each
session is only an hour, two meetings a month would cost Zook
$280. 	Due to her severe bipolar disorder, the cost for therapy
is a necessary expense for even a minimal standard of living.
Second, Defendants afforded only $35.00 (in medicare and
insurance co-payments) for Zook’s prescription medications. 	(DE
No. 5, p. 5.) 	However, Zook testified she also takes numerous
non-prescription medications, as well as vitamin and herbal
supplements. 	Zook testified these supplements were taken to
attempt to reverse some of the memory loss Zook suffered from
electroshock therapy, given as treatment for her depression; and,
for Ehlers-Danlos Syndrome. 	Zook’s efforts to recover and
preserve her health constitute necessary expenses.
Third, Defendants listed Zook’s entertainment expenses as
$35 (DE No. 49, p. 5), although they elicited from Zook an
estimate of $50 during her testimony. 	Zook had testified that
she spent $15 per month for Netflix (a home-delivery movie
service), and purchased three crossword puzzle books and one
other book per month, at approximately $15 per book. 	That
itemization would result in $75 per month, although I have used
the more conservative and very reasonable estimate of $50 in its
calculation above, as Zook agreed to that estimate during her
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testimony.
Fourth, Defendants listed no expenses for clothing (see DE
No. 49, p. 5). 	A minimal standard of living requires possession
of decent clothing and footwear, which will need to be replaced
from time to time. 	See In re Douglas, 366 B.R. 241, 253 (Bankr.
M.D. Ga. 2007) (citing In re Ivory, 269 B.R. at 899). 	This
expense includes clothing and footwear for both work and non-work
settings, and $150 per month is not an unreasonable amount with
which to procure those items.
Based upon these omissions and overly low estimations, I
reject Defendants’ estimate of $2,432.
The list above, enumerating the expenses quantified by Zook
at trial and resulting in a monthly budget of $3,227, would yield
a monthly surplus of $242.62 (i.e., $3,469.62 in income minus
$3,227 in expenses). 	However, the $3,227 budget neglects to
include several additional expenses, which Zook discussed during
her testimony but was unable to precisely quantify. 	Upon
considering those additional expenses, as below, no surplus
remains, and Zook’s income is inadequate to cover her expenses.
First, Zook’s therapy costs are understated. 	Zook has
already tightened her budget by seeing Dr. Cox only twice a
month, rather than seeing him once a week, as she had done
previously. 	Zook testified this was not due to any change in her
condition, but rather because she was unable to afford visiting
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Dr. Cox once a week. 	Were she to visit him once a week as she
had previously, costing an additional $280 per month, the monthly
surplus would already be exhausted. 	Furthermore, Zook testified
favorably of her work with an occupational therapist, who also
served as a life coach. 	However, she ceased her visits with her
occupational therapist due to financial limitations. 	Due to the
seriousness of her bipolar disorder and the severity of damage
that a period of depression causes, these medical expenses are
properly considered a part of a minimal standard of living for
Zook.
Second, in addition to bipolar affective disorder, Zook also
suffers from Ehlers-Danlos Syndrome, asthma, and allergies. 	Zook
testified that she sees an allergist and an ear, nose, and throat
specialist; however, there is no budgeting for any routine or
emergency visits.
Zook reserves $125 per month, pre-tax, from her salary for
medical expenses and places it in a MedFlex account. 	(See Trial
Exhibit O.) 	This $125 per month is not calculated in her net
monthly income of $3,469.62. 	However, that amount does little to
displace Zook’s budgeted $680 of medical services, medicines, and
supplements, or the additional expenses described above. 	Indeed,
the $125 would not pay for an hour of therapy from Dr. Cox.
Third, Zook owns a 1998 Toyota Camry. 	Zook testified that
the car requires $2,000 to $2,500 in repairs to its electrical
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system; $200 to $250 to replace a headlight cover; and, an
additional amount to refit the right side mirror. 	Zook
testified, based upon her home and work locations, she is unable
to take public transit to work. 	Any maintenance required on the
automobile is a necessary expense, and would quickly consume in
excess of her budgetary surplus under the $3,227 budget.
Fourth, Zook should be afforded some budgetary leeway to
save funds for emergencies. 	Other courts have recognized the
appropriateness of inclusion of a reasonable amount for emergency
spending. 	See, e.g., In re Douglas, 366 B.R. at 254 (recognizing
a lack of budgeting for emergency expenses was a factor that
indicated debtor’s budget was “extremely limited and bare.”). 	In
Zook’s case, such a fund is particularly warranted. 	Zook has no
credit cards and no stable network of support from family or
close friends. 	If she were to lose her job and were unable to
secure employment that included health insurance, her medical
bills would increase drastically (her $400 monthly estimate for
medications and supplement would increase to at least $1,200
without health insurance and medicare). 	A minimal standard of
living should provide some continuity, and Zook should not be
rendered homeless or precluded from necessary medical care or
prescriptions should she have a break in employment. 	This risk
of unemployment is more than a mere possibility. 	The severity of
Zook’s bipolar disorder will increase as she ages, and a relapse
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of her depressive state at some point is, statistically, almost
guaranteed. 	Moreover, Zook’s disease impairs her ability to
function well at work even when she is not suffering an episode
of severe depression, and it is quite surprising that she has
been able to hold onto her current employment as long as she has.
Defendants point to Zook’s savings of $5,000 as evidence she
was not maintaining a minimal standard of living, arguing she was
saving up to $400 per month. 	A majority of those savings would
be consumed due to Zook’s owing approximately $2,000 in federal
income tax from 2005 and 2006, and owing over $2,500 for oral
surgery she required due to a congenital condition. 	Such
expenses provide a clear example why Zook should be permitted
some ability to save for unexpected or unbudgeted expenses.
In arguing that Zook ought not be allowed to save,
Defendants cite Nash v. Conn. Student Loan Found. (In re Nash),
446 F.3d 188, 194 (1st Cir. 2006); Paul v. Suffolk Univ.
(In re Paul), 337 B.R. 730, 737 (Bankr. D. Mass. 2006); and
Pennsylvania Higher Educ. Assistance Agency v. Faish (In re
Faish), 72 F.3d 298, 307 (3d Cir. 1995). 	But as Defendants
acknowledge, a debtor need only show that expenses are reasonably
necessary, citing In re Savage, 311 B.R. 835, 841 (B.A.P. 1st
Cir. 2004), and In re Webb, 262 B.R. 685 (Bankr. E.D. Tex. 2001).
Zook has shown that her savings are both reasonable and necessary
to maintain a reserve to meet practically inevitable hard times
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in the future.
Defendants also point to two categories of what they
consider expenditure on luxury items that they contend
demonstrate that Zook has an ability to make some repayment of
her debts. 	They criticize, first, her expenditure of $600 per
month on food. 	Defendants cite In re Mandala, 310 B.R. 213, 218
(Bankr. D. Kan. 2004), in support of this criticism, but that
decision is distinguishable. 	As noted previously, that high
expenditure is necessitated in part by Zook’s inability to cope
with the basic life skill of preparing her own meals from
scratch, and part of that expense is not for groceries at home
but for lunch at work. 	Moreover, as discussed later in regard to
both this and the second category of expenditures that Defendants
criticize, merely establishing that the level of a particular
expenditure exceeds what a frugal individual would spend does not
alone carry the day for Defendants.
Defendants criticize, second, Zook’s telephone, cable and
entertainment expenditures as being at a high level. 	In support
of this argument, Defendants cite In re Miller, 377 F.3d 616,
623-24 (6th Cir. 2004); Mandala v. Educ. Credit Mgmt. Corp., 310
B.R. 213 (D. Kan. 2004); Commonwealth of Virginia State Educ.
Assistance Auth. v. Dillon, 189 B.R. 382 (Bankr. W.D. Va. 1995);
In re Wardlow, 167 B.R. 148, 151 (Bankr. W.D. Mo. 1993); In re
Hornsby, 242 B.R. 647, 652-53 (Bankr. W.D. Tenn. 1999); In re
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4 	Similarly, Zook’s level of expenditure on rent is
justified by her medical condition which would make it difficult
for her to minimize that expense by sharing an apartment with
someone else. 	Defendants have not challenged that expenditure
which consumes a large portion of Zook’s income.
20
East, 270 B.R. 485, 494 (Bankr. E.D. Cal. 2001); Educ. Credit
Mgmt. Corp. v. Buchanan, 276 B.R. 744, 751-52 (N.D. W. Va. 2002);
In re Pincus, 280 B.R. 303, 317-18 (Bankr. S.D.N.Y. 2002); and In
re Perkins, 318 B.R. 300, 309 (Bankr. M.D.N.C. 2004). 	But those
decisions are distinguishable as discussed below.
As noted above, Zook spends $50 per month on miscellaneous
entertainment and she spends $35 on cellular telephone service
and $140 on cable television, internet, and home telephone
service. 	A debtor is entitled under the minimal standard of
living test to incur some modicum of expenditures on telephone
and entertainment. 	See McLaney v. Ky. Higher Educ. Assistance
Auth. (In re McLaney), 375 B.R. 666, 674 (M.D. Ala. 2007) (“Even
under the minimal standard of living test, ‘[p]eople must have
the ability to pay for some small diversion or source of
recreation, even if it is just watching television or keeping a
pet.’" (quoting In re Ivory, 269 B.R. at 899)). 	Given Zook’s
mental disease, which makes it difficult for her to venture out
from her apartment, and her inability to readily socialize, this
level of expenditures on these types of items is not
unreasonable. 4 	It is noted, moreover, that by being a secluded
individual, Zook minimizes or eliminates amounts she might
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21
otherwise spend on such things as dinner out, movie theaters, or
discretionary driving.
Even if these expenditures (on food, telephone, cable, and
entertainment), at this level, and viewed in isolation, were not
necessary to maintain a minimal standard of living, Zook’s
overall expenditures are at a level consistent with maintaining a
minimal standard of living. 	In other words, these expenditures,
even if viewed as unreasonably high, represent amounts that
should be devoted to other expenses that are necessities and that
are not being met: a higher level of medical care, and a reserve
for practically inevitable future hard times. 	Zook deprives
herself of meeting her necessities if she is indeed failing to
act frugally by not reducing her expenditures on food and
entertainment to a lower level (and by not eliminating some of
them, like cable). 	As observed in In re McLaney, 375 B.R. at
676, “as a court examines a debtor's expense budget as a whole,
it is appropriate for a court to take into account reasonably
necessary items that are omitted, thereby creating, in the words
of the bankruptcy court, ‘an austere and even understated expense
budget.’” (Citations omitted.) 	Given Zook’s lack of capacity to
function well in life, it is not surprising that she may not be a
paradigm of frugality.
The decisions Defendants cite in support of their criticism
of the level of Zook’s expenditures on food and on telephone,
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22
cable, and entertainment are distinguishable. 	The debtors in
those cases were not failing to attain an income sufficient to
meet the level of expenditures required (1) appropriately to
address unique needs arising from the debtor’s suffering from a
severe, incurable, and chronic medical condition and (2) to meet
as well other expenditures necessary to maintain a minimal
standard of living. 	This, then, is like such cases as In re
Douglas, 366 B.R. at 253-54 (“Debtor's other necessary expenses
still exceed her income by several hundred dollars even without
the inclusion of the cable television and modem service
expense.”).
By the Defendants’ logic, a debtor living well below the
poverty level would be denied a discharge if the debtor, by
foregoing a reasonable level of expenditure on clothing, spent
part of his income on what would be considered luxury items, for
example, cable or going out to dinner. 	A debtor whose income is
insufficient to meet a minimal standard of living, taking into
account the level of expenditures necessary for that purpose,
ought not be denied a discharge of student loan debts based on
the creditor’s finding some item of expenditure that could be
deemed a non-necessity. 	The Brunner test ought not be turned in
that fashion into a game of “gotcha” based on viewing certain
expenditures in isolation, wearing blinders that disregard the
debtor’s needs in a global fashion.
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23
Based upon Zook’s budget, her monthly income of $3,469.62
and $125 monthly pre-tax medical flex account savings is
inadequate to pay for her basic month-to-month necessities,
including necessary health care, medications, and supplements,
and does not permit her the opportunity to save funds to meet
another necessity–-setting aside a reserve to weather the high
likelihood of future periods of depression, and loss of income,
caused by her bipolar disorder. 	As such, Zook lacks the ability
to maintain a minimal standard of living if she were also
required to repay her education loans.
B.
FUTURE ABILITY TO PAY
The next inquiry is whether there are any additional
circumstances that indicate the debtor will not be able to make
such payments in the foreseeable future. 	See Polleys, 356 F.3d
at 1310; Brunner, 831 F.2d at 396. 	This requires consideration
of any additional circumstances which will persist, or are likely
to arise, which would prevent the debtor from securing adequate
shelter, nutrition, health care, and similar necessities.
Polleys, 356 F.3d at 1310.
Here, Zook suffers from a severe bipolar affective disorder,
which will only become more difficult to manage as she ages.
Although Zook made approximately $55,000 in 2006 and received a
$5,000 raise in 2007, Zook’s work history, coupled with
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24
consideration of her condition, indicates her current salary is
unlikely to continue. 	See Barrett v. Educ. Credit Mgmt. Corp.,
487 F.3d 353, 360 (6th Cir. 2007) (citing In re Cheesman, 25 F.3d
356, 360 (6th Cir. 1994)) (“[A] debtor’s work history is a
relevant and significant consideration in projecting whether a
debtor’s current state of affairs is likely to persist.”)
Zook’s previous employment, or lack thereof, yielded income
as follows: $11,893 in 2004; -$11.00 in 2003; $715 in 2002;
$29,337.00 in 2001; and, $15,710 in 2000. 	(Trial Exhibit K, p.
8). 	None of these years even approach her 2007 salary of
approximately $60,000.
The pattern in Zook’s income history is explained by the
state at any given time of her bipolar affective disorder.
Zook’s disorder is characterized by periods of significant to
moderate effectiveness, followed by periods of depression in
which Zook is unable to care for herself. 	This fluctuation is
evident in Zook’s income history.
According to Dr. Cox, although Zook can develop some ability
to manage her condition, the very nature of her condition
indicates it will become more difficult to manage as she ages and
will involve relapses into depressive states. 	Although a general
risk of future unemployment does not negate a future ability to
pay, here there is a specific risk of future unemployment. 	Dr.
Cox’s testimony and Zook’s history of inconsistent employment and
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5 	Zook repeatedly testified that she was likely to be
terminated at her place of employment in the near future, due to
her self-assessed, poor performance. 	In light of Zook’s medical
conditions and work history, that testimony is quite credible.
25
fluctuating periods of functionality convincingly demonstrate
that Zook’s current finances will not substantially improve in
the foreseeable future, and that there is a specific risk of
periodic unemployment due to her bipolar condition. 	This all
indicates her finances will in all likelihood be drastically less
favorable from time to time. 5
Defendants urge that Zook can pay currently and through the
foreseeable future if she were compelled to enroll in the Income
Contingent Repayment Program (“ICRP”), and specifically under the
ICRP option of making a monthly payment for 25 years of “20% of
the borrower’s discretionary income, which is defined as the
borrower’s adjusted gross income minus the poverty level for the
borrower’s family size.” 	(Defendants’ Ex. M at p. 2. See also
Federal Student Aid - Repayment Plans, at
www.ed.gov/offices/OSFAP/DirectLoan/RepayCalc/dlindex2.html).
Enrollment in the ICRP is not a viable option for Zook. 	The
ICRP calculation for discretionary income ignores Zook’s very
considerable medical bills, and thus would over-calculate Zook’s
disposable income (her income available after meeting necessary
expenses), and thus would overstate the amount she would be able
to pay.
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Even if the ICRP could provide Zook with a payment plan that
would require a nominal monthly payment, compelling Zook to do so
here would result in nothing but pointless hardship. 	As
previously noted, Zook’s debt of approximately $76,000, at an
interest rate of 7.14%, generates $5,426.40 in interest in the
first year. 	Zook would need to pay approximately $450 per month
to only pay the yearly interest of the loan. 	Zook’s nominal
payment through ICRP would have no chance of ever decreasing the
loan’s principal; indeed, as interest compounds each year, Zook
would spend the next 25 years (after which the loan is forgiven
under the ICRP) watching her debt increase, despite her payments.
These payments of futility in the face of ever-growing debt
would have very serious psychological and financial consequences
for Zook. 	Zook would have a significant stressor to face in her
ongoing struggle with severe bipolar affective disorder; should
the stressor result in or prolong a depressive episode, Zook will
lose work hours or her employment altogether in coping with that
episode. 	Any ICRP payments would come from Zook’s attempts to
save for the next depressive period, or would force her to forgo
more of the therapy or counseling she requires to better manage
her condition. 	With continuously growing debt, Zook would also
be unable to secure any credit in the future, could not save for
retirement, and would have no opportunity to make a fresh start.
See In re Jesperson, 2007 WL 1113803, *8-9 (Bankr. D. Minn. Apr.
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16, 2007) (recognizing that requiring a repayment scheme that
could never reach the principal would condemn the debtor to a
life of poor credit and a cash-only lifestyle, characterizing the
situation as being “sentenced to 25 years in a debtors’ prison
without walls”).
In light of Zook’s severe bipolar affective disorder and its
effects, Zook will be unable to repay her loans in the
foreseeable future.
C.
GOOD FAITH EFFORT TO REPAY
The final inquiry is whether the debtor has, in good faith,
attempted to repay the loan. 	See Polleys, 356 F.3d at 1310;
Brunner, 831 F.2d at 396. 	A debtor must show he or she has made
reasonable efforts to maximize income and minimize expenses in
order to repay the loan. 	See Polleys, 356 F.3d at 1309. 	A
debtor cannot intentionally over-budget, recklessly spend,
flippantly ignore the debt, or otherwise strategically attempt to
claim a windfall by shirking responsibility for his or her loans.
The court may also consider whether the debtor has tried to make
some payments when he or she could, or has sought to defer the
loan or renegotiate the repayment plan. 	Cf. Brunner, 831 F.2d at
397 (rejecting satisfaction of the good faith requirement because
the debtor made no effort to first defer the loan payments while
she was unemployed, and filed for discharge of the debt shortly
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6In addition to being used to pay for Zook’s unsuccessful
attempts at completing medical school and living expenses, Zook
lost $20,000 investing in the stock market, and spent $20,000 to
pay for later hospitalization.
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after she finished her education and prior to the first payment
being due).
Here, Zook has made good faith efforts both to repay her
loans and to minimize her budget. 	Zook inherited $180,000 and,
although no payments were due at that time, paid back $30,000 of
her undergraduate student loans. 	According to Zook’s testimony,
she saved and invested the remaining money ($150,000) to pay for
medical school and provide for her cost of living during that
period. 6 	To minimize her budget, Zook stopped seeing her
occupational therapist, and went from seeing Dr. Cox once a week
to twice a month, in order to minimize her expenses. 	There is
nothing in evidence which indicates that Zook is in any way
attempting to avoid repayment of her loans in bad faith.
Zook has not proceeded in bad faith in failing to agree to
an ICRP plan. 	There is no per se rule that failure to agree to
an ICRP plan establishes bad faith. See Educ. Credit Mgmt. Corp.
v. Mosley, 494 F.3d 1320, 1327 (11th Cir. 2007); Barrett v. Educ.
Credit Mgmt. Corp. (In re Barrett), 487 F.3d 353, 364 (6th Cir.
2007); Tirch v. Pa. Higher Educ. Assistance Agency (In re Tirch),
409 F.3d 677, 682 (6th Cir. 2005). 	Moreover, the ICRP is
“not always a viable option for debtors . . ., as it may require
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29	O:\TEEL\Race\Memo - discharge of student loan - adv proc - Pamela Zook v4 (2-23 edits).wpd
them effectively to ‘trad[e] one nondischargeable debt for
another’ because any debt that is discharged under the program is
treated as taxable income.” In re Mosley, 494 F.3d at 1327
(quoting In re Barrett, 487 F.3d at 364). 	Finally, Zook has
demonstrated (as discussed with respect to future ability to pay
in part IV(B), above), the ICRP would not work for her because it
would understate her medical expense needs and her need to
reserve for the practically inevitable periods of unemployment
she will suffer due to her medical condition.
V
Having satisfied the three requirements of the Brunner
standard, Zook has established that she would undergo an undue
hardship were she compelled to repay her education loans. 	As
such, a judgment follows declaring that her student loans at
issue in this adversary proceeding be discharged pursuant to 11
U.S.C. § 523(a)(8).
[Signed and dated above.]
Copies to:
All parties and counsel of record.
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