Dykstra v. Spellings et al

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
(Greenbelt Division)
In re: 	*
SUZANNE DYKSTRA, 	* 	Case No. 05-37925-WIL
Chapter 7
Debtor. 	*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
SUZANNE DYKSTRA, 	*
Plaintiff, 	*
v. 	* 	Adv. No. 06-01304-WIL
MARGARET SPELLINGS, et al., 	*
Defendants. 	*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OF DECISION IN SUPPORT OF ORDER
DETERMINING STUDENT LOAN DEBT TO BE DISCHARGEABLE
On March 15, 2006, Suzanne Dykstra (the “Debtor”) filed a Complaint to Determine
Dischargeability of Debts (the “Complaint”) against Margaret Spellings, U.S. Secretary of
Education and the U.S. Department of Education (collectively, the “Defendants”), seeking a
determination that certain debts owed to the Defendants are dischargeable student loan debts
pursuant to 11 U.S.C. § 523(a)(8). Trial on this matter was held on January 26, 2007. The Court
Signed: February 23, 2007
SO ORDERED
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has reviewed the pleadings, exhibits, testimony of three witnesses, and the record in this case,
and finds that the relief sought by the Debtor will be granted.
I. 	BACKGROUND
The Debtor is 51 years old and has no dependents. In 1977, she graduated from college
with a Bachelor of Science degree in bio-engineering. In 1981, she joined the U.S. Army
Reserves and attended the Uniformed Service University of Health Sciences in Bethesda,
Maryland. Due to psychological and physical problems, which will be discussed further below,
the Debtor did not complete her medical degree and was terminated from the program in 1982.
In 1983, she was honorably discharged from the Army Reserves.
From 1984 to 1989, the Debtor worked as a live-in childcare provider for a family with
two children in Chevy Chase, Maryland. In 1988, she returned to school to pursue a graduate
degree at the University of Maryland. She funded her education through several student loans,
which are the subject of this adversary proceeding. In 1996, the Debtor began a doctoral
program. However, conflicts arose between the Debtor and her advisor. In 1999, the advisor
resigned and she could not find a replacement. Without an advisor, she could not finish her
doctorate and the University of Maryland terminated her from the program.
After that, she worked various jobs, including retail and as a delivery driver. She now
works between 13 and 30 hours per week for Westat, Inc., calling medical offices and collecting
billing data as part of an expenditure survey for the company. Her net monthly income is about
$1,150.00. Her monthly expenses total about $1,463.57. She has minimal expenses and does
not live extravagantly. She rents a basement apartment in Ijamsville, Maryland for $575.00 per
month. Included in this amount is heat, electricity, internet access and satellite service for the
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television. Her other expenses include sporadic payments for a cell phone provided by the
Center for True Justice and Healing in return for her volunteer work ($5.00 - $25.00), gas for the
car, and groceries ($220.00 - $240.00). She spends about $65.00 per month on her personal care
and on her three cats. She drives a 1998 Saturn that has not passed a Maryland emissions test
since 2005. Her student loan debt totals about $180,000.00. She has made some payments on
these loans and has participated in an income contingent repayment plan. She testified that when
she can, she pays approximately $10.00 per month on her student loan debt.
On its face, this appears to be a case in which a college educated, intelligent woman has
not found work in a field commensurate with her education level or in her chosen field, and that
she is in financial distress, a common situation in bankruptcy cases. However, at trial, the
Debtor proved that she has suffered some form of mental illness most of her life. Her problems
have worsened over the years and have manifested themselves in physical ways as well. She has
been homeless, she has been hospitalized, she has been assaulted. Since 1982, she has been
treated for various medical problems and has been diagnosed with severe anxiety and depression,
panic disorder, borderline personality disorder, urinary tract infections, irritable bowel
syndrome, and sinus and thyroid problems. The Debtor testified that the medications prescribed
to her for her mental illness did not alleviate all of the symptoms and, in some instances, only
exacerbated both the mental and the physical problems. She had a negative experience with at a
psychiatrist and has not been under psychiatric care with any regularity as a result. She sees a
physician who prescribes her medication which does not eliminate the depression or panic
attacks. According to
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the Debtor, she is depressed most mornings and it takes time for her to ready herself for work.
She testified that she is has on average between seven and thirty panic attacks per week, the
aftereffects of which can last for weeks, or months, depending on their severity.
In 2006, she retained Dr. Leonard J. Hertzberg to perform an assessment of her in
preparation for trial. He examined her in June and July of 2006 and reviewed her medical
records from 1995 through early 2006. At trial, he was qualified as an expert. He testified that
the Debtor had been diagnosed with the following: major depression, panic disorder, ulcerative
colitis, recurrent herpes simplex viral infections and obesity. He also found that she is at high
risk for coronary artery disease.
The Debtor’s early morning depression, frequent panic attacks and fear interfere with her
ability to work a regular schedule or to have any semblance of a social life. She has never been
married and she has no children. She lives in a basement apartment with no working stove, three
cats, a computer and a television. Reverend Wayne Price, Sr., her pastor and counselor since
1984, gave her a cell phone so that she can reach someone when she has a panic attack. She is
afraid to get professional help. She is afraid to maintain accounts in her name for fear that
collection efforts will set off panic attacks. Her employer allows her a flexible work schedule to
accommodate her psychological and medical problems. The Debtor testified that due to all of
these circumstances, she has been unsuccessful in her efforts to find employment or to use her
education and background in her chosen field.
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CONCLUSIONS OF LAW
The Debtor seeks a determination that her student loan debt is dischargeable as an undue
hardship under 11 U.S.C. § 523(a)(8). That section provides that a discharge under section 727
of this title:
“does not discharge an individual from any debt – unless excepting
such debt from discharge under this paragraph would impose an undue hardship
on the debtor and the debtor’s dependents, for:
(A)(i) 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
(ii) an obligation to repay funds received as an educational benefit,
scholarship or stipend; or
(B) any other educational loan that is a qualified educational loan, as
defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by
a debtor who is an individual.”
11 U.S.C. § 523(a)(8).
The test in the Fourth Circuit for “undue hardship” is a stringent one. The Debtor must
establish that: (1) she cannot maintain, based on current income and expenses, a “minimal”
standard of living for herself and any dependents if she is forced to repay the loan; (2) additional
circumstances show that her inability to pay the loan is likely to persist for a significant portion
of the repayment period of the student loans; and (3) the Debtor has made good faith efforts to
repay the loans. Educational Credit Mgt. Corp. v. Frushour (In re Frushour), 433 F. 3d 393,
400 (4th Cir. 2005) (adopting the “Brunner Test” in Chapter 7 cases and citing Brunner v. N.Y.
State Higher Educ. Servs. Corp., 46 B.R. 752, 756 (S.D.N.Y. 1985)). The Debtor must prove all
three factors by a preponderance of the evidence. Id. Mere inability to repay the loan is not
sufficient; if that were the case, all debtors would be able to prove undue hardship. Id. at 399.
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The Debtor must show that the unique or extraordinary circumstances which created her
hardship make it unlikely that she will ever be able to honor her obligations. Burton v.
Educational Credit Mgt. Corp. (In re Burton), 339 B.R. 856 (Bankr. E.D. Va. 2006) (quoting
Lezer v. N.Y. State Higher Educ. Servs. Corp. (In re Lezer), 21 B.R. 783, 789 (Bankr. N.D.N.Y.
1982)).
In order to determine whether or not the Debtor can maintain a minimal standard of
living, the Court must evaluate, at the very least, whether her monthly expenses exceed her
income. Id. at 871. This does not mean subsistence at the poverty level but is reviewed on a
case-by -case inquiry into the Debtor’s situation. As to the second factor, the Debtor must show
that her circumstances are likely to persist for a significant portion of the repayment period on
her loans. Frushour, 433 F. 3d at 401. The Court also evaluates a variety of “additional
circumstances,” including: (1) whether or not there are any dependents in the Debtor’s care;
(2) the Debtor’s level of education and the quality of that education; (3) the Debtor’s lack of
marketable job skills; (4) age or other factors that would prevent retraining or relocation in order
to increase her income; (5) lack of assets; (6) underemployment; (7) number of years remaining
in the Debtor’s work life to allow repayment of the loan; (8) maximum income potential in the
Debtor’s chosen educational field; and (9) illness or incapacity. Id. at 873 (internal citations
omitted). Importantly, discharge based on medical disability requires corroborating evidence to
substantiate “what would otherwise be merely self-supporting testimony by the debtor.” Id. at
876. The third factor requires the Debtor to show that she is has made an effort to obtain
employment, maximize her income, minimize expenses and make payments when she can.
Id. at 884.
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The Court finds that the Debtor has satisfied her burden with respect to all three factors
of the Brunner Test. As discussed, the Debtor earns about $1,150.00 per month and her monthly
expenses total about $1,463.57. The parties did not dispute these amounts or that her minimal
expenses exceed her income. The Debtor established at trial that she is on the edge, financially,
physically and mentally. Although she is not employed commensurately with her education and
abilities, this is not the Debtor’s desire; it is necessitated by her condition. She cannot work full
time and her current employment is probably the best economically, considering her need for a
flexible work schedule. Dr. Hertzberg testified that while she may have contributed to the
exacerbation of her psychological problems due to her unwillingness to seek psychiatric
treatment, the damage has been done and her situation is not likely to improve. He further
testified that it was highly unlikely that the Debtor would have the capacity to work in a better or
more advanced job even with medical care and a healthier lifestyle.
There is no dispute that the Debtor has tried to repay her loans, through consolidation,
through the contingent income program and on her own. She has established that, despite a
college education and some doctorate work, she will never be a doctor and she is unlikely to
improve her employment opportunities. All of these facts, together with the evidence presented
about her age, physical and mental condition leads this Court to conclude that the Debtor is
probably earning as much as she can and there is very little prospect for change in the future.
For the foregoing reasons, the Court finds that the student loan debt imposes an undue
hardship on the Debtor and, pursuant to 11 U.S.C. §523(a)(8), the debt will be discharged. A
separate Order will be entered contemporaneously with this Memorandum.
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cc: 	Debtor
Counsel for the Debtor - Mary Garrett Bunker, Esq.
Amala Nath, Student Attorney
Drew Newman, Student Attorney
Defendant
Counsel for Defendant - Larry D. Adams, Esq.
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