Needham v. U.S. Department of Education

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
fure 	)
)
KATHRYN ANNE NEEDHAM 	)
)
Debtor. 	)
)
KATHRYN ANNE NEEDHAM 	)
)
Plaintiff, 	)
)
v. 	)
)
U.S. DEPARTMENT OF EDUCATION 	)
)
Defendant. 	)
Case No. 	13-20181
Chapter 7
Adv. No. 	13-2027
OPINION ON COMPLAINT TO DISCHARGE
CONSOLIDATED STUDENT LOANS
On October 1, 2014, this matter came before the court for an evidentiary hearing.
Debtor/Plaintiff, Kathryn Anne Needham ("Needham") requests the court determine that
her student loans are dischargeable under§ 523(a)(8). At the conclusion of the hearing,
the court took the matter under advisement. Having reviewed the record, testimony and
other evidence, the parties' arguments, and applicable law, the court is prepared to rule.
Jurisdiction
The court has jurisdiction over this adversary proceeding under 28 U.S.C. §§ 157
and 1334. This is a core proceeding within the definition of28 U.S. C. § 157(b)(2)(I). 1
1 Unless otherwise noted, all further statutory references are to Title 11 of the United States Code.
Case 13-02027 Doc 30 Filed 10/23/14 Entered 10/23/14 14:53:15 Desc Main
Document Page 1 of 6

Exhibits - reserved rulings
During the course of the evidentiary hearing the court reserved ruling on the
admissibility of Exhibits: 5, 11, 12, 13, 14, 15, 18 and 22. Having reviewed the exhibits
and objections, the court admits the exhibits into evidence.
Facts
Ms. Needham filed for chapter 7 bankruptcy protection on March 5, 2013. She
received her discharge under §727 on August 19, 2013, discharging unsecured debt in the
amount of approximately $133,259.00.
Ms. Needham has a Bachelor of Arts degree from the University of Northern
Colorado in Communication and Mass Media. In 2009, she received a Master of Science
in Organization Management and Information Technology Management from Regis
University. To obtain this degree she incurred the student loan debt that is the subject of
this adversary proceeding. 	The total amount of her student loan debt, as of August 15,
2014, was $84,675.22 with the fixed interest rate of6.875 percent. Ms. Needham has not
made any payments toward this debt.
Ms. Needham lives in Jackson, Wyoming with one dependant, an eleven year old
son. She lived and worked in Colorado, moving to Jackson in 2004 to attend to her
mother, who was failing. 	Since her mother passed, she continues to have a family
relationship with her brother and her sister-in-law provides in-kind support by caring for
her son when Needham works weekends.
Ms. Needham testified that she has had a few medical issue, including an injury to
her back, but is fully healed.
Page2
Case 13-02027 Doc 30 Filed 10/23/14 Entered 10/23/14 14:53:15 Desc Main
Document Page 2 of 6

Ms. Needham has been employed, full-time, at First American Title Insurance
Company ("First American") for four years. Additionally, Needham works part-time for
Barker-Ewing Whitewater ("Barker-Ewing"). Her annual income, as reflected on her
federal tax returns, is:
Year 	Annual Income 	Monthl:t Income
2010 	$26,674.00 	$2,222.84
2011 	29,140.00 	2,428.34
2012 	28,385.00 	2,115.42
2013 	29,225.00 	2,435.42
Ms. Needham testified that she received a two percent (2%) wage increase in July, 2014
from First American Title. 	She estimates that her earnings in 2014 from Barker-Ewing
will be $3,200.00.
The court's review ofNeedham's Schedule I, testimony and exhibits regarding her
income reflect that she received an average net income in the amount of$1,930.00 per
month from her employment at First American. 2 This does not include the $3,000.00 per
year that Needham earns with her part-time employment.
The court compared Needham's expenses from three sources. First, Needham's
Schedule J reflects her average monthly expenses to be the amount of$1,755.00.
Secondly, Needham testified that her expenses included: rent ($950.00/month); insurance
($850.00 per year); car maintenance ($400.00 per year); hair cuts ($300.00 per year);
telephone ($1,000.00 per year); food ($6,000.00 per year); and discretionary spending
($70.00 per month). The court's calculation of Needham's expenses, based upon her
2 This average was calculated from the pay history often payrolls from April25, 2014 to August 29, 2014,
subtracting Needham's deductions and taxes from the earnings. Deductions appear to include insurance and
payments to Needham's 40l(k).
Page3
Case 13-02027 Doc 30 Filed 10/23/14 Entered 10/23/14 14:53:15 Desc Main
Document Page 3 of 6

testimony, reflects that her monthly expenses are $1,732.00 per month. Third, Needham's
responses to her interrogatories reflects her estimated monthly expenses total $1,624.00.
Needham's other discretionary expenses include an enrollment fee in the amount of
$500.00for her son to attend the Jackson Hole Classical Academy for private schooling.
The tuition for the school is an additional $50.00 per month. 	This private schooling is not
required or necessary for the child's education.
Needham qualified for Income Based Repayment Plan options for her student
loans. During 2013, her estimated monthly payment was calculated to be $70.38.
Needham testified, and the evidence presented, reflects that the cost of living in
Jackson is approximately twenty-percent more than other communities in Wyoming.
Discussion
The Bankruptcy Code provides that an education loan is not dischargeable in
bankruptcy unless excepting the debt from discharge will impose an undue hardship on
the debtor and debtor's dependents. 3 The Bankruptcy Code does not define "undue
hardship." 4 The Tenth Circuit adopted the three-part Brunner test to determine whether
debtor is experiencing an undue hardship providing for the discharge of student loans. 5
Under Brunner, the debtor must prove by a preponderance ofthe evidence that: (1) the
debtor cannot maintain, based on current income and expenses, a "minimal" standard of
living for herself and her dependant if forced to repay the loans; (2) additional
3 § 523(a)(8).
4 Educational Credit Management Corporation v. Polleys. 356 F. 3d 1302 (IO'" Cir. 2004).
5 id.
Page4
Case 13-02027 Doc 30 Filed 10/23/14 Entered 10/23/14 14:53:15 Desc Main
Document Page 4 of 6

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) debtor has made good faith
efforts to repay the loans.
The court determined Needham's disposable income by using its calculation of
Needham's net monthly income, [$1,930.00], subtracting the greatest amount of
expenses, [$1,755.00] and finding that she has $175.00 per month available to pay toward
her student loans. This is without including the additional income from her part-time job
with Barker-Ewing. As Needham has income available after the payment of her listed
expenses, the court finds that she has not met her burden establishing that she cannot
maintain, based on current income and expenses, a "minimal" standard ofliving for
herself and her dependant if forced to repay the loans.
The court finds that Ms. Needham did not testifY to additional circumstances that
exist indicating that her minimal income is likely to persist for a significant portion of the
student loan repayment period. The repayment period of her student loans is 10 years.
Her income steadily increases each year. Although Ms. Needham testified that the cost of
moving and the unfamiliarity of the aspects of moving has slowed and narrowed her
efforts to find a job in her field, she has that option. Ms. Needham's testimony that jobs
in her field have not be available in the Jackson area, does not persuade this court that this
state of affairs is likely to persist for a significant portion of her 10-year repayment
period. 	She admitted that she limited her employment search to Jackson, Salt Lake City
and Fremont County, Wyoming as she prefers to stay in Jackson and that she has not
looked for another job since April2014.
Page 5
Case 13-02027 Doc 30 Filed 10/23/14 Entered 10/23/14 14:53:15 Desc Main
Document Page 5 of 6

Pursuant to the income-base repayment terms, Ms. Needham's required payment
was zero until February 2013. At that time, based upon her income, the monthly
payments were increased to approximately $70.00 per month. Ms. Needham testified that
during the entire repayment term, she has not paid any payments toward her student loan
debt. The court finds Needham failed to carry her burden that she made a good faith effort
to pay her student loan debt.
In conclusion, the court finds that Ms. Needham has failed to carry her burden that
an undue hardship exists for the discharge of her student loan debt.
This opinion constitutes the Court's findings of fact and conclusions oflaw. A
separate order shall be entered pursuant to Fed. R. Bank. P. 9021.
DATED this~3 day of October, 2014.
Service to:
Kathryn Needham
Mark Klaassen
Page 6
Case 13-02027 Doc 30 Filed 10/23/14 Entered 10/23/14 14:53:15 Desc Main
Document Page 6 of 6