[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
_______________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 02-10788 JULY 23, 2003
_______________ THOMAS K. KAHN
CLERK
D.C. Docket No. 01-00194-WCO-2
Bkcy No. 99-22320-BKC-RE
In Re:
RONALD JAY COX,
Debtor.
__________________________________________________________________
HEMAR INSURANCE CORPORATION OF AMERICA,
ILLINOIS STUDENT ASSISTANCE COMMISSION,
Plaintiffs-Appellees,
versus
RONALD JAY COX,
Defendant-Appellant.
_______________
Appeal from the United states District Court
for the Northern District of Georgia
_______________
(July 23, 2003)
Before EDMONDSON, Chief Judge, WILSON, Circuit Judge, and NELSON*,
District Judge.
_______________
*Honorable Edwin L. Nelson, United States District Judge from the Northern District of
Alabama, sitting by designation. This case is being decided by quorum due to the death of Judge
Nelson on 17 May 2003. See 28 U.S.C. § 46(d).
PER CURIAM:
I. INTRODUCTION
Appellant, Ronald Jay Cox (Cox) filed a petition seeking protection from
his creditors pursuant to Chapter 7 of the Bankruptcy Code, with the United States
Bankruptcy Court for the Northern District of Georgia. As a part of his petition,
he filed an adversary proceeding under 11 U.S.C. § 523(a)(8)1; claiming that
repayment of his student loans will result in “undue hardship” and seeking a full
discharge of his student loan indebtedness.
This Circuit has yet to adopt a specific standard for determining “undue
hardship” under § 523(a)(8). For the reasons stated herein, we adopt the standard
set forth by the Court of Appeals for the Second Circuit in Brunner v. New York
State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987) (per curiam).
Further, we agree with the district court’s conclusion that, because Cox will suffer
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Section 523(a)(8) provides:
A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title
does not discharge an individual debtor from any debt for an educational benefit
overpayment or loan made, insured or guaranteed by a governmental unit, or made
under any program funded in whole or in part by a governmental unit or nonprofit
institution, or for an obligation to repay funds received as an educational benefit,
scholarship or stipend, unless excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor and the debtor’s
dependents.
11 U.S.C. § 523(a)(8) (emphasis added).
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no “undue hardship” in repaying his student loan debts, his student loan
indebtedness is non-dischargeable.
II. BACKGROUND
Ronald Jay Cox has several degrees to his credit, namely an A.A. in
business administration from Gainesville Junior College, a B.A. in business
administration from North Georgia College, a J.D. from Thomas Cooley Law
School, and an LL.M. in taxation from the University of Alabama. In addition to
his considerable education, Cox is licensed to practice law in Michigan and
Georgia. To fund his education, Cox acquired several student loans.
Consequently, he now owes $65,340.35 to the Illinois Student Assistance
Commission, $19,511.62 to the Educational Resources Institute, Inc., $18,000 to
HEMAR Insurance Corp., and $11,388.91 to the United States Government, for a
total of more than $114,000.
After obtaining his LL.M. in taxation, Cox established a law practice in
Cumming, Georgia. Unfortunately, Cox’s law practice turned out to be an
unprofitable venture. As a result, Cox began winding down his failing law
practice and secured employment with his brother’s landscaping company, earning
$24,000 per year. Because of his deteriorating financial situation, on March 19,
2001, Cox filed the underlying loan discharge action pursuant to § 523(a)(8),
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claiming that he could not pay off his student loan debts without suffering “undue
hardship.” 11 U.S.C. § 523(a)(8).
At the trial concerning Cox’s claim, the bankruptcy court made the
following findings: (1) Cox was unable to maintain a minimal standard of living,
given the totality of the circumstances; (2) Cox had made good faith efforts to
repay his student loans; and (3) given Cox’s skills and education, his current
inability to repay his student loans is not likely to be a permanent condition.2
Because the bankruptcy court did not consider Cox’s current financial situation to
be a “permanent condition,” it held that Cox did not make “out a case of undue
hardship as contemplated by 11 U.S.C. § 523(a)(8) as would justify total discharge
of [his] student loans.” However, in light of “the magnitude of the amount of the
existing student loans and the accumulation of interest,” the bankruptcy court
ordered a partial discharge, reducing Cox’s student loan indebtedness from
approximately $114,000 to $50,000, and established a 25-year plan for repayment
of that amount at a 7% annual interest rate.
Cox’s creditors appealed the bankruptcy court’s decision to the district
court. The creditors argued that under the terms of § 523(a)(8), student debt
2
Although the bankruptcy court did not refer to it by name, this three prong analysis of
“undue hardship” is consistent with the test set out in Brunner. See 831 F.2d at 396.
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cannot be discharged, even in part, absent a showing of “undue hardship.” The
district court agreed with the bankruptcy court that Cox had not demonstrated
undue hardship. However, the district court held that in the absence of undue
hardship, student loan debt could not be discharged, in whole or in part. It thus
reversed the bankruptcy court’s partial discharge of Cox’s student debt. This
appeal followed.
III. STANDARD OF REVIEW.
This Court has jurisdiction over this matter under 28 U.S.C. § 158(d). The
district court’s and bankruptcy court’s factual findings are reviewed for clear error.
Lykes Bros., Inc. v. United States Army Corps of Engr’s, 64 F.3d 630, 634 (11th
Cir. 1995). A factual finding is not clearly erroneous unless “this court, after
reviewing all of the evidence, [is] left with the definite and firm conviction that a
mistake has been committed.” Id. (internal quotation marks omitted). This Court
conducts a de novo review of “determinations of law, whether from the bankruptcy
court or the district court.” In re Bilzerian, 100 F.3d 886, 889 (11th Cir. 1996)
(per curiam).
IV. DISCUSSION
A. The Brunner test of “undue hardship.”
Although § 523(a)(8) clearly requires a showing of “undue hardship,” for
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discharge of student loan indebtedness in bankruptcy proceedings, the code
neglects to define the term. As a result, “[b]ankruptcy courts use a wide variety of
tests to determine whether the debtor has demonstrated undue hardship. While
these tests have received varying degrees of acceptance, no particular test
authoritatively guides or governs the undue hardship determination.” In re: Faish,
72 F.3d 298, 302 (3d Cir. 1995) (alteration in original) (internal quotation marks
omitted). This court has yet to address the appropriate factors to be considered in
determining when a debtor has shown “undue hardship.” Several of our sister
circuits have addressed this issue, however, and adopted the test set forth by the
Second Circuit in Brunner. See In re Ekenasi, 325 F.3d 541, 546–50 (4th Cir.
2003); In re Brightful, 267 F.3d 324, 327–28 (3d Cir. 2001); In re Rifino, 245 F.3d
1083, 1087–88 (9th Cir. 2001); In re Roberson, 999 F.2d 1132, 1135–37 (7th Cir.
1993). But see In re Long, 322 F.3d 549, 553 (8th Cir. 2003) (applying “the
totality-of-the-circumstances test”); In re Hornsby, 144 F.3d 433, 437 (6th Cir.
1998) (“[d]eclining to adopt any one test”). As we find the reasoning of the
majority of our sister circuits persuasive, we now hold that the Brunner test is the
appropriate test for determining “undue hardship.”
The Brunner court adopted the following three-part test for the “undue
hardship” exception to § 523(a)(8):
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[to establish “undue hardship,” the debtor must show] (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.
831 F.2d at 396.
Cox claims the 1998 amendments to the statute, removing the only
alternative method of discharging student loans and leaving “undue hardship” as
the sole avenue for relief, rendered the Brunner test inappropriate because “the
Brunner test now produces harsh, and sometimes absurd, results.” We disagree.
As the Seventh Circuit recognized in In re Roberson,
The government is not twisting the arms of potential students. The
decision of whether or not to borrow for a college education lies with
the individual; absent an expression to the contrary, the government
does not guarantee the student’s future financial success. If the
leveraged investment of an education does not generate the return the
borrower anticipated, the student, not the taxpayers, must accept the
consequences of the decision to borrow.
999 F.2d at 1137. Congress’s intent to make it harder for a student to shift his
debt responsibility onto the taxpayer is clear from the 1998 amendments.
Moreover, the Brunner test leaves an avenue of relief and is an effective tool for
identifying those debtors whose earning potential and circumstances make it
unlikely that they will produce the means necessary to repay the student loans
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while maintaining a minimal standard of living. This situation, in essence, is what
constitutes an “undue hardship” – not the mere inability to pay, but an inability to
pay that is likely to continue for a significant time. The Brunner test is an
effective tool in analyzing that potential.
B. Partial discharge pursuant to § 523(a)(8).
Although the Bankruptcy Court found, as a matter of fact, that repayment of
his student loan indebtedness would not impose an “undue hardship” on Cox, the
court granted Cox a partial discharge of his debt. Whether a partial discharge of
student loan indebtedness is possible without a finding of “undue hardship” is a
question of first impression for this Court.
The language of § 523(a)(8) clearly and unambiguously provides that the
bankruptcy laws do “not discharge an individual debtor from any debt” arising
from a student loan. 11 U.S.C. § 523(a)(8) (emphasis added). The only exception
is that an individual debtor may be discharged of his student loan indebtedness
upon a showing that “excepting such debt from discharge . . . will impose an
undue hardship on the debtor.” Id. (emphasis added). There is no other language
within § 523(a)(8) that could reasonably be construed to permit a discharge, partial
or otherwise, absent a finding of “undue hardship.” “[T]he duty of interpretation
does not arise” for a statute when the plain language of the statute admits to only
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one meaning. Caminetti v. United States 242 U.S. 470, 485 (1917).
Cox contends this construction of § 523(a)(8) goes against Congress’s
intent that bankrupt debtors be given a “fresh start.” However, the history of §
523(a)(8) is consonant with our interpretation. Shortly after Congress established
the Guaranteed Student Loan Program under the Higher Education Act of 1965,
students began discharging their educational obligations through the Bankruptcy
Act. Consequently, in 1976 Congress enacted Section 493A of the Education
Amendments of 1976, which provided:
A debt which is a loan insured or guaranteed under the authority of
this part may be released by a discharge in bankruptcy under the
Bankruptcy Act only if such discharge is granted after the five-year
period (exclusive of any applicable suspension of the repayment
period) beginning on the date of commencement of the repayment
period of such loan, except that prior to the expiration of that five-
year period, such loan may be released only if the court in which the
proceeding is pending determines that payment from future income or
other wealth will impose an undue hardship on the debtor or his
dependents.
Education Amendments of 1976, Pub. L. No. 94-482, 90 Stat. 2081, 2141
(codified at 20 U.S.C. § 1087-3 (1976) (repealed 1978)) (emphasis added). In
1978 the essence of Section 439A was re-codified in § 523(a)(8). Congress
subsequently amended § 523(a)(8) in 1979, 1984, and 1990, with each amendment
further limiting the dischargeability of student loans. Finally, in 1998 Congress
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left “undue hardship” as the only possible avenue for a debtor to obtain a
discharge of student loan indebtedness. See 11 U.S.C. § 523(a)(8). Considering
the evolution of § 523(a)(8), it is clear that Congress intended to make it difficult
for debtors to obtain a discharge of their student loan indebtedness.
Furthermore, there is no evidence of an intent to permit judicially created
exceptions to § 523(a)(8) via the “fresh start” principle. According to the plain
meaning of § 523(a)(8), a debtor cannot obtain a discharge of student loan
indebtedness without a finding of “undue hardship.”
Cox contends that the bankruptcy court’s equitable powers under 11 U.S.C.
§ 105(a) allow it to construct an equitable remedy, namely a partial discharge,
even if the “undue hardship” burden is not met.3 The bankruptcy court’s equitable
powers, however, do not allow it to override the specific statutory language found
in § 523(a)(8). It is a well settled rule of statutory interpretation that “[w]here
3
Cox contends that, although the bankruptcy court applied a “totality of the
circumstances” analysis rather than the Brunner test, the bankruptcy court’s factual findings
demonstrate that he met the Brunner test. Although the bankruptcy court did not explicitly name
the “undue hardship” standard it employed, the record clearly reflects that it was using the three-
prong Brunner test. Using this test, the bankruptcy court concluded that Cox did not establish
undue hardship to justify total discharge of his loans. In proceedings before the district court,
Cox argued the Bankruptcy Court’s decision was “correct as a matter of law and fact” and he
failed to file any kind of cross-appeal claiming the bankruptcy court’s findings were clearly
erroneous. Because the equitable principles of judicial estoppel prevent Cox “from deliberately
changing positions according to the exigencies of the moment,” we decline to disturb the findings
below in these circumstances. Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir.
2002).
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there is no clear intention otherwise, a specific statute will not be controlled or
nullified by a general one, regardless of the priority of enactment.” Morton v.
Mancari, 417 U.S. 535, 550–51 (1974). Because the specific language of §
523(a)(8) does not allow for relief to a debtor who has failed to show “undue
hardship,” the statute cannot be overruled by the general principles of equity
contained in § 105(a). To allow the bankruptcy court, through principles of
equity, to grant any more or less than what the clear language of § 523(a)(8)
mandates would be “tantamount to judicial legislation and is something that
should be left to Congress, not the courts.” In re Mallinckrodt, 260 B.R. 892, 904
(Bankr. S.D. Fla. 2001), rev’d, 274 B.R. 560 (S.D. Fla. 2002)..
AFFIRMED.
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