Appeal from the United States Bankruptcy Court for the District of Minnesota.
The opinion of the court was delivered by: Federman, Bankruptcy Judge
Submitted: September 22, 2010
Before FEDERMAN, VENTERS and NAIL, Bankruptcy Judges.
Debtor Kellie K. Sederlund appeals from the Order of the Bankruptcy Court*fn1 holding that her student loans should not be discharged pursuant to 11 U.S.C. § 523(a)(8). For the reasons that follow, we AFFIRM.
Debtor Kellie K. Sederlund is forty-two years old. She has no physical, mental, or psychological disability. She began her college education in 1986 and, in March 1992, earned a Bachelor of Arts degree in Psychology from the University of Minnesota - Twin Cities. Although she worked throughout college, she funded her education, in part, through student loans. In March 1992, she consolidated all of her student loans, in the amount of $16,649.70, with Sallie Mae Loan Servicing Association. Over the next twelve years, she paid a total of $11,825.10 against the student loans. Her last payment was in 2004. Since that time, she has received forbearances and economic hardship deferments from the loan holders. ECMC now holds the consolidated loan, which totaled approximately $47,000 at the time of trial.
As discussed in more detail below, the Debtor never obtained employment in her field of study, but has held several jobs over the years, mostly at law firms and with the food service industry. She has also had periods of unemployment. The Debtor is unmarried and has no children or dependents. Since 2004, the Debtor has lived with her boyfriend, who pays more than half of their household expenses.
The Debtor filed a Chapter 7 bankruptcy petition on December 11, 2008, and received a general discharge on March 13, 2009. On March 2, 2009, she filed an adversary proceeding seeking to have her student loans discharged. Following a trial, at which the Bankruptcy Court announced its findings and conclusions, the Bankruptcy Court entered judgment in favor of Defendant ECMC, holding that the Debtor had not met her burden of proving undue hardship, so the loans are not dischargeable under § 523(a)(8). The Debtor appeals.
"Undue hardship 'is a question of law which we review de novo. Subsidiary findings of fact on which the legal conclusion is based are reviewed for clear error.'"*fn2
Dischargeability of student loans is governed by § 523(a)(8) of the Bankruptcy Code, which provides, in relevant part, that a discharge under § 727 does not discharge an individual debtor from any debt for student loans, "unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents . . . ."*fn3 In making a determination of undue hardship, the Bankruptcy Court may properly consider the circumstances as they exist at the time of trial.*fn4
The Eighth Circuit has adopted a totality-of-the-circumstances test in evaluating undue hardship in student loan cases:
We apply a totality-of-the-circumstances test in determining undue hardship under § 523(a)(8). Reviewing courts must consider the debtor's past, present, and reasonably reliable future financial resources, the debtor's reasonable and necessary living expenses, and "any other relevant facts and circumstances." The debtor has the burden of proving undue hardship by a preponderance of the evidence. The burden is rigorous. "Simply put, if the debtor's reasonable future financial resources will sufficiently cover ...