Markwood v. Navient Solutions, Inc.

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IN THE UNITED STATED BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE: 	)
)
JESSICA KAYE LAMB MARKWOOD, 	) 	Case No. 13-bk-1390
)
Debtor. 	) 	Chapter 7
)
___________________________________ 	)
)
JESSICA KAYE LAMB MARKWOOD, 	)
)
Plaintiff, 	)
)
v. 	) 	Adversary No. 14-ap-04
)
U.S. DEPARTMENT OF EDUCATION, 	)
and SALLIE MAE, INC., 	)
)
Defendants. 	)
___________________________________ 	)
MEMORANDUM OPINION
The U.S. Department of Education (“DOE”) seeks summary judgment dismissing the
Plaintiff’s complaint based upon the Plaintiff’s alleged failure to plead facts sufficient to
establish that her debt owed to DOE creates an “undue hardship” on her and her dependents.
The Debtor contends that the court cannot grant summary judgment given the nature of her
complaint.
For the reasons stated herein, the court will grant summary judgment to DOE.
I. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56, made applicable to this proceeding by Federal Rule
of Bankruptcy Procedure 7056, provides that summary judgment is only appropriate if the
movant demonstrates “that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” 	Fed. R. Civ. P. 56(a). 	A party seeking summary
Dated: Friday, October 31, 2014 4:09:26 PM
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judgment must make a prima facie case by showing: first, the apparent absence of any genuine
dispute of material fact; and second, the movant’s entitlement to judgment as a matter of law on
the basis of undisputed facts. 	Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 	The
movant bears the burden of proof to establish that there is no genuine dispute of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). 	Demonstrating an absence of any genuine
dispute as to any material fact satisfies this burden. Id. at 323. Material facts are those necessary
to establish the elements of the cause of action. Anderson, 477 U.S. at 248. Thus, the existence
of a factual dispute is material — thereby precluding summary judgment — only if the disputed
fact is determinative of the outcome under applicable law. Shaw v. Stroud, 13 F.3d 791, 798 (4th
Cir. 1994). A movant is entitled to judgment as a matter of law if “the record as a whole could
not lead a rational trier of fact to find for the non-movant.” 	Williams v. Griffin, 952 F.2d 820,
823 (4th Cir. 1991) (citation omitted); see also Anderson, 477 U.S. at 248.
If the moving party shows that there is no genuine dispute of material fact, the
nonmoving party must set forth specific facts that demonstrate the existence of a genuine dispute
of fact for trial. Celotex Corp., 477 U.S. at 322-23. The court is required to view the facts and
draw reasonable inferences in the light most favorable to the nonmoving party. Shaw, 13 F.3d at
798. 	However, the court’s role is not “to weigh the evidence and determine the truth of the
matter [but to] determine whether there is a need for a trial.” Anderson, 477 U.S. at 249-50. Nor
should the court make credibility determinations. 	Sosebee v. Murphy, 797 F.2d 179, 182 (4th
Cir. 1986). If no genuine issue of material fact exists, the court has a duty to prevent claims and
defenses not supported in fact from proceeding to trial. Celotex Corp., 477 U.S. at 317, 323-24.
II. BACKGROUND
In 2011, the Debtor executed a promissory note to obtain a consolidation loan from DOE
made as part of DOE’s William D. Ford Federal Direct Loan Program. From May 2012 to April
2013, the Debtor made monthly payments of $121.99. 	Since May 2013, the Debtor’s monthly
payment due to DOE has been $0 based upon her participation in DOE’s income-contingent
repayment plan. On November 25, 2013, the Debtor filed a Chapter 7 voluntary petition in this
court. And on February 4, 2014, she filed this adversary proceeding seeking to discharge several
debts arising from student loans, including the obligation to DOE. 	As of March 4, 2014, the
Debtor owed DOE $72,277.24. She continues to participate in the income-contingent repayment
plan and currently owes DOE $0 per month.
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III. DISCUSSION
DOE asserts that it is entitled to summary judgment because the undisputed facts alleged
by the Debtor, even taken as true, fail to establish that the debt due and owing to DOE imposes
an “undue hardship” on the Debtor or her dependents. 	The Debtor contends that summary
judgment is inappropriate in this proceeding because the court cannot determine whether the debt
due and owing to DOE imposes an “undue hardship” without a trial on the merits of her
complaint.
Debts arising from student loans are generally excepted from a debtor’s bankruptcy
discharge “unless excepting such debt . . . would impose an undue hardship on the debtor and the
debtor’s dependents . . . .” 	11 U.S.C. § 523(a)(8). 	To determine what constitutes “undue
hardship,” a phrase not defined by the Bankruptcy Code, the Fourth Circuit Court of Appeals
adopted the three-part test established in Brunner v. New York State Higher Educ. Servs. Corp.,
831 F.2d 395, 396 (2d. Cir. 1987) (per curiam). 	Educ. Credit Mgmt. Corp. v. Frushour (In re
Frushour), 433 F.3d 393, 400 (4th Cir. 2005) (citing Brunner, 831 F.2d at 396). To discharge a
debt arising from a student loan similar to the one at issue in this proceeding, a debtor must
demonstrate
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.
Id. (citing Brunner, 831 F.2d at 396).
Under the first prong of the Brunner test, the court focuses on the debtor’s ability to
maintain a minimal standard of living “if forced to repay the student loans.” 	Magsino v. U.S.
Dept. of Ed. (In re Magsino), Adv. No. 12-3247, 2014 WL 1341932, at *4 (Bankr. W.D.N.C.
Apr. 4, 2014) (emphasis in original). A debtor must show “more than an austere budget or tight
finances.” Straub v. Educ. Cred. Mgmt. Corp. (In re Straub), 435 B.R. 312, 316 (Bankr. D.S.C.
2010) (citing Garrett v. N.H. Higher Educ. Assistance Found., 180 B.R. 358, 362 (Bankr.
D.N.H. 1995)).
The second prong of the Brunner test, which is at its heart, is “a demanding requirement”
necessitating a “certainty of hopelessness” that the debtor will be unable to repay the student
loans. 	Frushour, 433 F.3d at 401 (internal quotations and citations omitted). 	“The debtor’s
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hardship must be more than the normal hardship that accompanies any bankruptcy.” Id. (citing
Rifino v. United States (In re Rifino), 245 F.3d 1083, 1087 (9th Cir. 2001)). 	“For example,
although not exhaustive, a debtor might meet this test if she can show illness, disability, a lack of
usable job skills, or the existence of a large number of dependents.” Id. (internal quotation and
citation omitted). 	“The existence of the adjective ‘undue’ indicates Congress viewed garden-
variety hardship as insufficient excuse for a discharge of student loans.” 	Rifino, 245 F.3d at
1087 (internal quotation and citation omitted).
Here, the undisputed material facts, and inferences to be drawn in the Debtor’s favor, are
insufficient to support a finding of “undue hardship,” as defined by the Fourth Circuit.
Specifically, the Debtor failed to allege facts sufficient to satisfy the first and second prongs of
the Brunner test. 	Although the court can grant summary judgment to DOE based upon the
Debtor’s failure as to the first prong alone, Frushour, 433 F.3d 400 (emphasis added) (citation
omitted) (“The Debtor has the burden of proving all three factors by a preponderance of the
evidence.”), the court will analyze the Debtor’s failure regarding both the first and second prongs
of the Brunner test.
Regarding the first prong, the Debtor alleges that she does not have the ability to repay
the debt to DOE because her current household expenses, excluding her debt to DOE, exceed her
current household income. 	That is her only allegation in that regard. 	The Debtor does not
contend, however, that she is unable to maintain a minimal standard of living without
discharging the debt—the focus of the first prong of the Brunner test. The Debtor’s Schedules I
and J, which she filed with her bankruptcy petition and swore to under penalty of perjury,
indicate that her household income is $5,826.40 and her household expenses—not including her
debt to DOE— are $5,851.00, resulting in net monthly household income of negative $24.60.
Her Schedule J does not include her obligation to DOE, which supports her assertion that she has
insufficient income to pay the debt. 	But other household expenses on the Debtor’s Schedule J
belie the notion that her household cannot maintain a minimal standard of living while repaying
her obligation to DOE—currently $0 per month. 	Specifically, according to her Schedule J, the
Debtor has the following monthly household expenses: 	$100 for recreation, $170 for cell
phones, $1,000 for food, $233 for the combined repayment of two retirement loans, and $375 for
the debt maintenance of her non-filing spouse. 	Although the court is not adjudging the
legitimacy of any of the Debtor’s household expenses, the court finds that the expenses elucidate
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the Debtor’s standard of living, which the court finds to be more than “minimal,” particularly
given the minimal amount by which her household expenses exceed her household income on a
monthly basis and the fact that the Debtor’s monthly payment to DOE is $0 based upon her
enrollment in the income contingent repayment plan. Because the Debtor’s repayment to DOE,
currently $0, has no impact on her ability to maintain what the court finds to be at least a
“minimal” standard of living, the court finds that the undisputed material facts in this proceeding
warrant the granting of summary judgment to DOE.
Similarly, the Debtor failed to satisfy the second prong of the Brunner test because she
failed to allege facts sufficient to demonstrate that additional circumstances exist showing that
the current state of affairs is likely to persist for a significant portion of the repayment period.
Indeed, the undisputed material facts here do not support a finding that the Debtor suffers from
any atypical hardship leading to a “certainty of hopelessness.” Rather, the Debtor alleges in her
complaint only that her financial circumstances are not reasonably likely to improve in the near
future. 	Notably, however, the only hardship from which the Debtor suffers is a financial one.
She conceded during an August 19, 2014 telephonic pre-trial hearing that she suffers from no
medical hardship or mental disability. In fact, the Debtor possesses both a bachelor’s degree and
a master’s degree in business administration. Additionally, although Eastern WVCTC employs
the Debtor and seems to be her only current source of income, the Debtor’s statement of
financial affairs indicates that she also holds an interest in Lambent Marketing, a marketing
business in which she has held an interest since 2011. 1 Although Lambent may not currently be
an income-generating venture, the court finds its existence and potential to generate income in
the future precludes a finding that the Debtor faces a “certainty of hopelessness.” The court thus
finds that although her current household income may be insufficient to pay her obligation to
DOE—currently $0 per month—the Debtor failed to plead facts sufficient to satisfy the second
prong of the Brunner test.
1 	Regarding the Plaintiff’s employment with Eastern WVCTC, she alleges in her response to
DOE’s Interrogatory No. 2 that it qualifies for the Public Service Loan Forgiveness program
such that she may be eligible to apply for loan forgiveness after working for a public agency for
a total of ten years. Although it is unclear from the record whether DOE disputes that allegation,
that is further evidence, by the Plaintiff’s own admission, that her hardship does not rise to the
level of a “certainty of hopelessness.”
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Insofar as the Debtor contends that the court cannot dispose of this proceeding without
considering live testimony at trial, her argument is without merit. 	A determination of “undue
hardship” requires the court to apply the legal standard set forth in Brunner to the facts of this
proceeding. 	To the extent such a determination can be made based upon undisputed material
facts at the dispositive-motions phase of the proceeding, a trial is unnecessary and would be a
waste of judicial resources. 	Here, the pleadings make clear that the parties do not dispute
material facts or inferences to be drawn in the Debtor’s favor based upon those facts. Moreover,
the Debtor failed to set forth specific facts that demonstrate the existence of a genuine dispute of
fact for trial in her response to DOE’s motion for summary judgment. Because those undisputed
material facts and inferences do not support the Debtor’s cause of action under §523(a)(8), the
court will grant DOE summary judgment.
IV. 	CONCLUSION
Based upon the foregoing, the court will grant DOE’s summary judgment and dismiss the
Plaintiff’s complaint against it.2 	The court will enter a separate order consistent with Fed. R.
Bank. P. 7058.
2 	On July 9, 2014, the court entered an order dismissing the Plaintiff’s complaint as to the
following three of five defendants in this proceeding: 	American Education Services, Fedloan
Servicing, Inc., and SLM Corp. 	Because the court is now dismissing the complaint as against
DOE, only the Plaintiff’s cause of action against Sallie Mae, Inc., remains.
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