United States Court of Appeals
For the First Circuit
No. 05-2549
IN RE: NOREEN E. NASH,
Debtor.
____________________
NOREEN E. NASH,
Plaintiff, Appellant,
v.
CONNECTICUT STUDENT LOAN FOUNDATION,
NEW HAMPSHIRE HIGHER EDUCATION ASSISTANCE FOUNDATION,
AND UNITED STATES DEPARTMENT OF EDUCATION,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Howard, Circuit Judge,
Coffin and Campbell, Senior Circuit Judges.
Joseph S.U. Bodoff with whom Bodoff & Slavitt LLP was on brief
for appellant.
Susan Maxson Lyons, Attorney, Appellate Staff, with whom
William Kanter and Robert M. Loeb, Attorneys, Appellate Staff, and
Peter D. Keisler, Assistant Attorney General, were on brief for
U.S. Department of Education.
Mark F. Weaver with whom Ford, Weaver & McDonald, PA, was on
brief for New Hampshire Higher Education Assistance Foundation.
R. Richard Croce for Connecticut Student Loan Foundation.
April 26, 2006
COFFIN, Senior Circuit Judge. Appellant is the debtor in a
Chapter 7 bankruptcy proceeding. The total indebtedness revealed
by her bankruptcy schedules was approximately $285,000; of this
amount, some $140,000 consisted of student loans, made or
guaranteed by state student loan foundations, universities, and the
United States Department of Education. This appeal stems from an
adversary proceeding brought by appellant against these entities in
the bankruptcy court of the District of Massachusetts, seeking
discharge of her education loans, under 11 U.S.C. § 523(a)(8), on
the ground that repaying the debts would impose an "undue hardship"
on her.1
The bankruptcy judge ruled that appellant had not carried her
burden of showing "undue hardship." The judge based her conclusion
on the absence or inadequacy of evidence on three points:
appellant’s long-term prognosis, the effects over time of therapy
and medication, and the effects of her mental condition on her
employment prospects. The judge added a finding that appellant had
not made a good faith attempt to repay her loans. In affirming,
the district judge endorsed both the good faith finding and the
conclusion "that Nash had not shown that her disability was likely
to continue for such a period of time that she could not reasonably
1
In relevant part, 11 U.S.C. § 523(a)(8) provides that a
discharge in bankruptcy does not discharge a debtor from a
specified class of student loan debt "unless excepting such debt
from discharge . . . will impose an undue hardship on the debtor .
. . ."
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be expected to repay the education loans in the future." See Nash
v. Conn. Student Loan Found., 330 B.R. 323, 327 (D. Mass. 2005).
For reasons we shall explain, we affirm without reaching the issue
of good faith.
I. The Legal Setting
In the course of the proceedings to this point, there has been
much attention given to the particular test which should be applied
to determine "undue hardship." Congress did not attempt to give
specific guidance. We as a circuit have not had occasion to
declare our views.
Appellees would have us join the nine circuit courts of appeal
that have followed the Second Circuit's test set forth in Brunner
v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir.
1987) (per curiam). This is a tripartite test, requiring that the
debtor show inability, at her current level of income and expenses,
to maintain a "minimal" standard of living; the likelihood that
this inability will persist for a significant portion of the
repayment period; and the existence of good faith efforts to repay
the loans. Id. at 396.
A facially different test is the Eighth Circuit's totality-of-
circumstances test, which would have courts consider the debtor's
reasonably reliable future financial resources, his reasonably
necessary living expenses, and "any other relevant facts.” See
Long v. Educ. Credit Mgmt. Corp. (In re Long), 322 F.3d 549, 554
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(8th Cir. 2003). Appellant contends that this test does not
include "good faith effort" under the "other relevant facts"
rubric, although bankruptcy courts within the Eighth Circuit are
not unanimous on this issue. She urges a “true totality of the
circumstances test,” focusing solely on the ability of the debtor
to maintain a minimal standard of living now and in "the
foreseeable future" and still afford to make loan repayments.
The bankruptcy judge, citing her opinion in Burkhead v. United
States (In re Burkhead), 304 B.R. 560, 565 (Bankr. D. Mass. 2004),
applied the totality approach but was of the view that courts
essentially looked at the same factors under either test. She
listed four relevant factors, including good faith efforts. The
district judge noted the unadorned breadth of the statutory
language, which he felt pointed to the totality test as "the
default standard for all judging," and found that the care and
methodical approach of the bankruptcy judge was "proper employment
of a 'totality-of-the-circumstances' test, which is another way of
saying it was proper judging." See 330 B.R. at 326-27.
We see no need in this case to pronounce our views of a
preferred method of identifying a case of "undue hardship." The
standards urged on us by the parties both require the debtor to
demonstrate that her disability will prevent her from working for
the foreseeable future. Appellant has a formidable task, for
Congress has made the judgment that the general purpose of the
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Bankruptcy Code to give honest debtors a fresh start does not
automatically apply to student loan debtors. Rather, the interest
in ensuring the continued viability of the student loan program
takes precedence. TI Fed. Credit Union v. DelBonis, 72 F.3d 921,
937 (1st Cir. 1995). Moreover, the judgment of the bankruptcy
court, which is the focus of our review, see Groman v. Watman (In
re Watman), 301 F.3d 3, 7 (1st Cir. 2002), was not a summary
judgment adverse to appellant; it was a decision reached after
trial and, as the district judge properly noted, that court's
findings of fact must stand if reasonably supported. See McMullen
v. Sevigny (In re McMullen), 386 F.3d 320, 329 (1st Cir. 2004).
The ultimate question of law – whether appellant proved “undue
hardship” – is subject to de novo review. Tirch v. Penn. Higher
Educ. Assistance Agency (In re Tirch), 409 F.3d 677, 680 (6th Cir.
2005); Martin v. Bajgar (In re Bajgar), 104 F.3d 495, 497 (1st Cir.
1997).
Taking this view of the case, we need not consider the issue
of good faith effort to repay; nor need we review the evidence
concerning appellant’s use and retention of her income and assets,
or her failure to utilize available avenues of assistance to
minimize the impact of repayment. We also emphasize that our
conclusion that this record is insufficient to carry the day does
not foreclose appellant from a future effort, buttressed with more
persuasive support.
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II. Factual Background
Appellant's higher education and employment history, from her
graduation with honors from Dartmouth in 1984 to her attendance at
the University of Michigan Law School a decade later, was one of
high achievement. From 1984 to 1990, she worked for a leading
publishing house, an international non-profit educational
organization, and the United Hospital Fund of New York, moving
upward steadily from editorial assistant to assistant and then to
associate editor, and finally to the position of public information
officer of the Hospital Fund. During this period she remained
current in her student loan repayments.
In 1990 she entered Yale Management School, receiving in 1992
what is now considered an MBA degree. On graduating, she was
employed by Prudential Securities as an investment banker in
healthcare and higher education finance, eventually being promoted
to a position as vice president in the municipal bond department,
with a salary of $120,000.
Appellant then carried out a decision reached two years
earlier and entered the University of Michigan Law School in 1994,
where she took a full course load and also worked as a research
assistant for four professors. During her first year, she found
she was having difficulty focusing. A psychiatrist treated her
with medication for manic/depressive symptoms. During the summer
of 1996, after her second year, she worked for a large law firm in
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Washington, D.C., but was unable to concentrate and to finish
assignments. During her third year, she felt obliged to withdraw
from law school and did some work as a telemarketer. She ceased
this work in December 1997. Subsequently, the Social Security
Administration determined that she had been disabled since December
1, 1997. She has not worked regularly since then, and has been
diagnosed with bipolar disorder. She is under the care of a pair
of doctors, Dr. Ronningstam and Dr. Mallya.
Appellant filed a voluntary petition under Chapter 7 of the
Bankruptcy Code in September 2002. All debts other than her
student loans were automatically discharged, and she then filed the
complaint underlying this appeal seeking discharge of the student
loans on the ground of undue hardship, under section 523(a)(8) of
the Bankruptcy Code.
III. Discussion
Under any test assessing eligibility for discharge of student
loan debt, appellant must show that her current inability to
maintain a minimal standard of living if forced to repay the debt
will continue into the future. We thus come to the issue we have
isolated as the key to decision in this appeal: does the record
support the bankruptcy judge's holding that appellant did not
establish that her disability would continue to prevent her from
remunerative work?
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The judge used various phrases to characterize the duration of
the incapacity that appellant needed to demonstrate. Nash seizes
on the judge's choice of language such as this passage reveals:
"The Debtor did not establish that it [is] more likely than not
that her mental condition will disable her indefinitely. There was
no admissible evidence to support a finding that Ms. Nash's
disorder permanently disables her from employment." (Emphasis in
original.) Appellant argues that this statement sets the bar
higher than is required even by Brunner, which requires only that
the evidence of disability endure for a significant portion of the
repayment period or for the reasonably foreseeable future. See 831
F.2d at 396.
What is revealed by the context of the judge's remarks,
however, is that her decision did not turn on the projected length
of appellant’s disability, but on the total absence of any reliable
evidence of future inability to work. The sentences we have quoted
were immediately preceded by the following:
There was a dearth of evidence on the Debtor's prognosis,
the effect of medication on her condition, and her
employment prospects. Ms. Nash submitted no evidence of
her long-term prognosis. It is unclear whether therapy
and medication will improve Ms. Nash's mental condition
over time.
Moreover, prior to the passage quoted, the judge had referred
in her opinion to another case involving bipolar disorder, where
expert testimony concluded with the prognosis that "it is more
likely than not that the debtor's debilitating condition will
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persist for a significant portion of the repayment period." See
Kelsey v. Great Lakes Higher Educ. Corp. (In re Kelsey), 287 B.R.
132, 144 (Bankr. D. Vt. 2001). This analysis, of course, is the
same formula endorsed by appellant. We think that the district
judge was justified in characterizing the bankruptcy court decision
as consistent with this formulation. In any event, we analyze the
record, applying the lowest threshold and searching it for any
compelling evidence of the disabling condition persisting for the
foreseeable future.
A major weakness in appellant's case, in contrast to Kelsey,
was her failure to call any of her doctors to testify. Nor did she
appeal the court’s exclusion of the expert prognosis in her medical
records, an action apparently taken for procedural reasons. The
state of the evidence at the conclusion of trial on January 23,
2004 was as follows.
Dr. Ronningstam's last report, dated April 17, 2003, states
that appellant suffers from bipolar II disorder, which includes
"episodes of major depression and episodes of elevated mood and
energy, but without mania." The condition disables her cognitive
functioning, endurance, and ability to concentrate. Tasks may
leave her feeling exhausted, lacking energy, having trouble
sleeping. Sometimes her thought processes go too fast, leaving her
head "spinning." She is sensitive to stress and easily tearful.
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Appellant added her agreement to these findings, adding that
there are days when she cannot get out of bed. She also referred
to two Temporary Total Disability Deferment Request forms, signed
by Dr. Mallya and stating that she is disabled with bipolar
disorder. These, however, do not indicate extensive duration of
total disability. The forms specifically carry the notation that
"[t]his disability is temporary" and that the debtor understands
that limitation. On the request dated July 23, 2002, the
certificate of the signing doctor stated that the length of the
disabling condition was "undetermined"; on the other, dated June 6,
2002, the entry as to duration is “unknown.” Appellant felt that
she could not apply for an administrative discharge of her loans
based on a permanent total disability because she retained the
capacity, at least sporadically, to earn small amounts of income.
Appellant's testimony, beyond affirming her doctors' report,
varied. She stated that she felt fine on some days, but that she
"fluctuate[d] hugely," that she had become in the past couple of
years "more stable," that "my life is much better now." She stated
that she could not commit to working five days a week but would
like to "make money when I can." Asked about her prognosis, she
replied that, at age 41, her chances of "stabilizing continuously
are not very good," but acknowledged that her medications helped
keep her from feeling "completely out of control." She was
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following a regimen of seeing Dr. Ronningstam three times a week
and Dr. Mallya once a week.
The specific question we face is whether, on this record,
where the illness is bipolar disorder, where we have no prognosis
from treating physicians or other experts, where the testimony of
appellant herself as to the future is necessarily speculative, the
bankruptcy court supportably found that appellant had not carried
her burden of proving a sufficient likely future period of
unemployability.
Appellant's perception of her case, as reflected by counsel in
oral argument, is essentially that one would not insist on expert
testimony if the debtor appeared in court in a wheelchair. Putting
to one side the observation that such a physical disability does
not in any way correlate to the ability to maintain demanding and
responsible employment, bipolar disorder is a rubric covering many
conditions, many kinds of treatment, and many levels and durations
of disablement. Appellant's last diagnosis was bipolar II
disorder. A booklet issued by the National Institute of Mental
Health, cited by the government, describes the levels of the
disorder as follows:
The classic form of the illness, which involves recurrent
episodes of mania and depression, is called bipolar I
disorder. Some people, however, never develop severe
mania but instead experience milder episodes of hypomania
that alternate with depression; this form of the illness
is called bipolar II disorder.
(Bold in original.)
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The booklet holds out the likelihood that people with bipolar
disorder may lead productive lives with proper treatment. The
records indicate that the illness afflicting appellant is not its
most severe form. In addition, we note that on January 27, 2003,
only seven weeks before the most recent evaluation on record, Dr.
Runningstam recorded a diagnosis of “Bipolar Disorder II/III.”
Whether this means that appellant's condition bordered on an even
less disabling form of the illness we do not know. But we are
confident that the bankruptcy judge did not commit any error of law
or clear error of fact in finding a lack of sufficient evidence of
the likely duration of appellant's inability to work.
A case remarkably similar on its facts to this one is Shilling
v. Sallie Mae Servicing Corp. (In re Shilling), 333 B.R. 716
(Bankr. W.D. Pa. 2005). The debtor had obtained a bachelor’s
degree in psychology before being adjudged disabled with a "severe
bipolar disorder" by a Social Security administrative law judge.
Id. at 720. As in the instant case, the debtor submitted no expert
evidence to supplement her own prognosis. The court stated:
While we might give considerable weight to the
opinion of a qualified expert concerning the expected
duration of debtor's psychological disorders, debtor
herself does not qualify as an expert in such matters.
Moreover, because she is caught in the maelstrom of her
psychological problems, debtor is not in a position to
offer an objective and informed opinion concerning her
future psychological condition, one that would withstand
scrutiny.
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Id. at 722. We cannot fault the bankruptcy judge in this case for
taking a similar position. See generally Burton v. Educ. Credit
Mgmt. Corp. (In re Burton), Nos. 04-53297-SCS, 05-5016-SCS, 2006 WL
802885 (Bankr. E.D. Va. Jan. 11, 2006) (discussing cases addressing
the need for corroborating medical evidence on prognosis of
disabling condition).
This does not mean the end of the road for appellant. If her
condition justifies it, she may be successful in securing an
administrative discharge on the basis of total and permanent
disability. See 34 C.F.R. § 682.402(c)(15); 34 C.F.R. §
685.213(a). In any event, our decision today does not bar
appellant from making another, more adequately supported request
for discharge. See 11 U.S.C. § 523(b); see also Storey v. Nat’l
Enter. Sys. (In re Storey), 312 B.R. 867, 875 (Bankr. N.D. Ohio
2004).2
Affirmed.
2
Section 523(b) states, in relevant part: “. . . [A] debt
that was excepted from discharge under subsection . . . (a)(8) . .
. in a prior case . . . is dischargeable in [a new action] unless,
by the terms of subsection (a) of this section, such debt is not
dischargeable . . . .”
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