Carl Victor Lorenzetti

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UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE: CARL VICTOR LORENZETTI,
Debtor, Case No.: 04-07016-8-JRL
CARL VICTOR LORENZETTI,
Plaintiff,
v. Adversary Proceeding No.:
04-00222-8-JRL
NORTH CAROLINA STATE EDUCATION
ASSISTANCE AUTHORITY,
Defendant.
________________________________________________________________________________
ORDER
The matter before the court is the complaint of Carl Victor Lorenzetti (“Lorenzetti”) against North
Carolina State Education Assistance Authority (“NCSEAA”) to determine whether Lorenzetti is entitled
to a discharge of his student loan debt. On August 18, 2005, the court conducted a trial in Wilmington,
North Carolina. Pursuant to Federal Rule of Bankruptcy Procedure 7052, this Order contains findings of
fact and conclusions of law based thereon.
FINDINGS OF FACT
1. Lorenzetti is a 55-year-old male who resides in Rocky Point, Pender County, North
Carolina with no dependents.
2. Lorenzetti suffers from a number of medical conditions, including peripheral neuropathy,
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diabetes mellitus, bilateral plantar fasciitis, hypertension, and osteoarthritis.
3. Lorenzetti is unable to stand or walk for long intervals of time. He needs a total replacement
of his right knee and orthoscopic surgery on his left knee. He has been informed that Medicare will only
cover 80% of the cost of surgery, and that he will have to make a deposit up front and pay the remaining
20% of the cost of surgery. The cost of surgery deters Lorenzetti from pursuing this course of action.
4. Lorenzetti also suffers from chest pain and shortness of breath. He has been diagnosed as
suffering from the early stages of congestive heart failure and pulmonary edema. One physician has advised
him to undergo triple bypass surgery. Again, the cost of surgery deters Lorenzetti from pursuing this course
of action.
5. At trial, the court observed Lorenzetti’s breathing difficulties, severe limp, and use of a
cane.
6. In November 1999, Lorenzetti stopped working as a prop maker in the movie and
television industry due to his deteriorating health. He became unable to perform job functions, such as
climbing scaffolding ladders. His physician advised him to seek other employment that did not require such
physical exertion.
7. In June of 2000, Lorenzetti applied for Social Security disability insurance benefits. On
September 17, 2001, the Social Security Administration concluded that Lorenzetti had been under a
disability since November 19, 1999 and was entitled to a period of disability benefits commencing from
that time until December 31, 2005. It further concluded that Lorenzetti’s impairments are “severe” and that
“[based] upon the claimant’s residual functional capacity and vocational factors, there are no jobs existing
in significant numbers, which he can perform.”
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8. Lorenzetti had a high school education and had no transferrable job skills to apply towards
a new career. He decided to pursue further education that would enable him to obtain a job better suited
for his health condition. From September 2000 through May 2003, Lorenzetti attended Cape Fear
Community College in Wilmington, North Carolina. He obtained student loans from College Foundation,
Inc., to fund that education. Lorenzetti received an associate degree in applied sciences in the area of
information systems technology. He also obtained additional certifications in that area.
9. While attending college, Lorenzetti made interest payments on his student loans. He was
able to finance those payments by using student loan money and grant money.
10. Upon obtaining his associate degree in information systems technology, Lorenzetti sent
resumes to numerous employers, such as Verizon and Best Buy. While some employers contacted him for
a first interview, no one contacted him thereafter. Lorenzetti believes that, during the job application
process, his age and physical condition were deterrents.
11. Lorenzetti qualified for a one-year deferment on repayment of his student loans. During that
period, he hoped to find gainful employment in his intended field so that he could repay his loans. However,
no one hired him. To this day, Lorenzetti has no practical experience in the area of information systems
technology.
12. Even if Lorenzetti had been offered a position in the field of informationsystems technology,
his deteriorating health would now prevent him from performing all necessary job functions, such as setting
up computer equipment and laying the wiring for computer systems.
13. Lorenzetti also pursued work outside of information systems technology. He contacted the
Gogas and Kangaroo stations; however, they both informed him that a job would entail more than sitting
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at a cash register. He would have to physically move merchandise in the store and take out the trash.
Lorenzetti’s health condition does not permit such physical activity.
14. Lorenzetti receives a monthly income of $832.00 in Social Security disability benefits. In
December 2004, the Social Security Administration performed another review of Lorenzetti’s medical
status and determined that he is eligible to continue receiving disability benefits. This is Lorenzetti’s sole
source of income.
15. His monthly expenses total $1,037.52. They include $528.52 for the home mortgage,
$120.00 for utilities (electric/gas), $90.00 for telephone, $100.00 for medicaland dental expenses, $40.00
for transportation, $64.00 for homeowner’s insurance, $45.00 for automobile insurance, and $50.00 for
recreation and entertainment, which must also include food.
16. Lorenzetti lives a sedentary lifestyle. He spends the bulk of his time sitting at his home
computer. He receives three basic television channels. Lorenzetti drives his vehicle sparingly. Due to the
cost of gasoline, he only makes the trip to nearby Wilmington, where his attorney and physicians are
located, once or twice a month.
17. Lorenzetti is indebted to NCSEAA in the approximate amount of $11,761.33.
18. Based on his progressive health problems and inability to find suitable employment,
Lorenzetti does not believe that he will be able to pay the student loan debt.
19. On cross-examination, counsel for NCSEAA asked Lorenzetti if he was aware of a
program at UNC Hospitals in Chapel Hill that might provide financial assistance for his surgeries. It was
clear to the court that Lorenzetti was unaware of such program and unaware of his possible eligibility for
such program.
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20. Counsel for defendant also asked Lorenzetti if he had received forms from the defendant
regarding his permanent and total disability status. Lorenzetti said his physician would not sign those forms,
as his physician could not attest to Lorenzetti’s permanent and total disability when there is the possibility
for some improvement through surgery.
21. NCSEAA acts as the guaranty agency for the Federal Family Education Loan Program
in North Carolina, and it acquired the debt previously owed to College Foundation, Inc. On January 18,
2005, the court granted NCSEAA’s motion to intervene and be substituted as the defendant in this matter.
CONCLUSIONS OF LAW
A debtor’s educational loans are not dischargeable in bankruptcy unless such debt “will impose
an undue hardship on the debtor and the debtor’s dependents.” 11 U.S.C. § 523(a)(8). Lorenzetti seeks
to discharge his student loan on grounds of undue hardship. The Fourth Circuit Court of Appeals has
adopted the test for undue hardship set forth in Brunner v. New York State Higher Education Services
Corp., 831 F.2d 395 (2d Cir. 1987). Under the Brunner test, to qualify for a discharge based upon undue
hardship, the debtor must establish the following factors: (1) that he cannot maintain a minimal standard of
living for himself and his dependents, based upon his current income and expenses, if he is required to repay
the student loans; (2) that additional circumstances indicate that his inability to do so is likely to exist for a
significant portion of the repayment period of the student loans; and (3) that he has made good faith efforts
to repay the loans. Ekenasi v. The Education Resources Institute (In re Ekenasi), 325 F.3d 541, 546 (4th
Cir. 2003); Brunner, 831 F.2d at 396.
In addressing the first factor, the court must evaluate whether the debtor has maximized his income
and minimized his expenses. Perkins v. Pennsylvania Higher Education Assistance Agency (In re Perkins),
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318 B.R. 300, 305 (Bankr. M.D.N.C. 2004). The court must be sensitive to the individual circumstances
of each case. Id. The court finds that Lorenzetti has maximized his income under the circumstances. After
suffering from declining health, Lorenzetti terminated his career as a prop maker in the television and movie
industry, as he was no longer able to perform all job functions. He applied for Social Security disability
benefits. The Social Security Administration concluded that Lorenzetti had suffered from a disability since
November 19, 1999 and that he qualified for disability benefits commencing from that time. In pertinent
part, the Social Security Administration stated: “Based upon the claimant’s residual functional capacity and
vocational factors, there are no jobs existing in significant numbers, which he can perform.” In addition to
applying for Social Security disability benefits, Lorenzetti made an effort to find gainful employment by
pursuing a degree in information systems technology—a field that he believed would better accommodate
his health condition. Upon receiving his degree and relevant certifications, he pursued jobs by sending out
resumes to employers and by participating in the interview process. Despite his efforts, he was unable to
secure employment in the field of information systems technology. He also sought work outside of his
intended field by discussing job possibilities with area Gogas and Kangaroo stations; however, employment
with either entity would have required physical activity that Lorenzetti could not perform with his health
condition. The record supports that, while suffering from multiple health impairments, Lorenzetti made
significant efforts to find potential sources of income.
The court also finds that Lorenzetti has minimized his expenses. Lorenzetti makes a conscious effort
to live a frugal lifestyle. He spends the bulk of his time sitting at his computer. He receives three basic
television channels. Aware of the soaring price of gasoline, Lorenzetti drives his vehicle sparingly, only
taking necessary trips to nearby Wilmington once or twice a month. The debtor’s monthly expenses set
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forth in his schedule total $1,037.52. They include the following basic expenses: $528.52 for the home
mortgage, $120.00 for utilities (electric/gas), $90.00 for telephone, $100.00 for medical and dental
expenses, $40.00 for transportation, $64.00 for homeowner’s insurance, $45.00 for automobile insurance,
and $50.00 for recreation and entertainment, which also must include food. It is clear that, despite his
efforts to maximize his income and minimize his expenses, Lorenzetti’s monthly expenses significantly
outpace his monthly income of $832.00. The court concludes that Lorenzetti cannot maintain a minimal
standard of living based upon his current income and expenses if he is required to repay his student loans.
The court now looks at the second factor—whether additional circumstances exist indicating that
this state of affairs is likely to persist for a significant portion of the repayment period of the student loan.
Examples of “additional circumstances” are “medical problems, lack of usable job skills or severely limited
education.” Perkins, 318 B.R. at 310. In Ekanasi, the Fourth Circuit emphasized that, when dealing with
a Chapter 7 case, the second factor of the Brunner test is based upon a “known, current situation.”
Ekenasi, 325 F.3d at 547. The court, therefore, will consider Lorenzetti’s current situation and take into
account relevant factors, such as his medicalimpairments, lack of usable job skills, and education. The most
significant factor here is his health condition. The court notes that it is not a requirement of the Brunner test
for a debtor to suffer a permanent and total disability. When awarding disability benefits to Lorenzetti, the
Social Security Administrationconcluded that Lorenzetti has “severe” impairments. The record reflects that
Lorenzetti, who is now 55-years-old, suffers fromperipheral neuropathy, diabetes mellitus, bilateral plantar
fasciitis, hypertension, and osteoarthritis. He is unable to stand or walk for long intervals of time, and he
needs a total replacement of his right knee and orthoscopic surgery on his left knee. Lorenzetti also suffers
from chest pain and shortness of breath, and he has been diagnosed with the early stages of congestive
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heart failure and pulmonary edema. This debtor suffers from a number of serious ailments, such that if one
condition was potentially treated, there would be another equally debilitating problem in its wake. Based
on a review of the medical records and testimony provided at trial, surgical treatment–while plausible for
some of his medical ailments--would not relieve this man of all significant health problems that he endures.
As for job skills, Lorenzetti’s practical experience is limited to prop making, and he is no longer
able to perform that type of activity. Lorenzetti has been unsuccessful finding employment in information
systems technology, and it is unlikely for that to change. Lorenzetti has no practical experience in that field.
He is 55-years-old, and his declining health eliminates his ability to do the physical aspects of the job, such
as assembling computer equipment and laying the necessary wiring for systems. Outside of the associate
degree in information systems technology, Lorenzetti has a basic high school education. Given Lorenzetti’s
serious health problems, age, jobs skills, and education, the court finds that his inability to pay the student
loans is likely to persist for a significant portion of the repayment period.
Lastly, the court must consider whether Lorenzetti has made good faith efforts to repay the loans.
When analyzing this third factor, the court must again consider the debtor’s efforts to obtain suitable
employment, to maximize his income, and to minimize his expenses. Perkins, 318 B.R. at 311. The record
supports that, while attending Cape Fear Community College, Lorenzetti made interest payments on his
student loans using loan and grant money. After receiving his associate degree, the debtor qualified for a
one-year deferment and hoped to find gainful employment during that time that would enable him to repay
his loans. Despite his efforts to send out resumes and participate in the interview process, no employer hired
him in the area of information systems technology. Moreover, Lorenzettti has been unable to find a suitable
job outside of information systems technology that can accommodate his medical impairments. As noted
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above, Lorenzetti’s sole source of income is $832.00 in disability benefits. Despite his frugal lifestyle,
Lorenzetti’s basic living expenses exceed his income. The court has found a sufficient showing of good faith
on the part of the debtor to repay his loans.
CONCLUSION
Based on the foregoing, the court finds that Lorenzetti has made the requisite showing of undue
hardship. Pursuant to 11 U.S.C. § 523(a)(8), the student loan debt owed by Lorenzetti to NCSEAA is
discharged.
So Ordered.
Dated: August 25, 2005
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