United States District Court, D. Kansas
MEMORANDUM & ORDER
MURGUIA, UNITED STATES DISTRICT JUDGE
matter comes before the court upon Appellant Educational
Credit Management Corporation (“ECMC”)'s
Notice of Appeal from Bankruptcy Court (Doc. 1). The matter
is fully briefed. The court granted Amicus Parties National
Association of Consumer Bankruptcy Attorneys
(“NACBA”) and National Consumer Bankruptcy Rights
Center (“NCBRC”)s' motion to file an amicus
brief (Doc. 10).
ECMC appeals the United States Bankruptcy Court's
decision to partially discharge appellees' student loans
pursuant to 28 U.S.C. §§ 158(a)(1), (c)(1)(A).
Appellant argues that appellees Alan and Catherine Murray did
not meet their burden of establishing an undue hardship as
required by § 528(a)(8) and as interpreted by the Tenth
Circuit, because they failed to show any of the three
elements enumerated in Brunner v. New York State Higher
Education Services Corporation, 831 F.2d 395, 396 (2d
argue that they met all three elements of the undue hardship
test and that requiring them to repay the full extent of
their student loan debt would contravene the Bankruptcy
Code's purpose of providing a fresh start to honest but
unfortunate debtors. They urge this court to uphold Judge
Somers's decision because it was based on debtors'
testimony and the unopposed evidence admitted at trial.
amici additionally suggest that debtors should not be
required to participate in income-driven repayment programs
(“IDRs”), as an alternative to bankruptcy, when
it is evident that debtors would never be able to repay their
loans in full. Amici suggest that IDRs should not be
considered in the undue hardship analysis.
Standard of Review
court functions as an appellate court when reviewing a
bankruptcy court's decision, and is authorized to affirm,
reverse, modify, or remand the bankruptcy court's order.
28 U.S.C. § 158(a); Fed.R.Bankr.P. 8013. Legal decisions
of the bankruptcy court are reviewed de novo. Educ.
Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302, 1305 (10th
Cir. 2004). But the bankruptcy court's factual findings
shall not be set aside unless they are clearly erroneous.
Fed.R.Bankr.P. 7052 (adopting Fed.R.Civ.P. 52(a)(6)). And the
court will give those factual findings due regard given the
bankruptcy court's opportunity to judge the facts first
hand, including the credibility of witnesses. Id.
finding of fact is clearly erroneous if it is without factual
support in the record or if, after reviewing all of the
evidence, [the court is] left with the definite and firm
conviction that a mistake has been made.” In re
Yellow Cab Co-op. Ass'n v. Metro Taxi, Inc., 132
F.3d 591, 597 (10th Cir. 1997)). The United States Supreme
Court further defines the clearly erroneous standard by
If the [bankruptcy] court's account of the evidence is
plausible in light of the record viewed in its entirety, the
court of appeals may not reverse it even though convinced
that had it been sitting as the trier of fact, it would have
weighed the evidence differently. Where there are two
permissible views of the evidence, the fact finder's
choice between them cannot be clearly erroneous.
Anderson v. City of Bessemer City, N.C. , 470 U.S.
564 (1985) (applied in the context of a bankruptcy appeal in
In re Blinder, Robinson & Co. v. Stellatos, 124
F.3d 1238, 1241 (10th Cir. 1997)).
Discharging Student Loan Debt under § 523(a)(8)
U.S.C. § 523 sets out the exceptions to the
dischargability of debt in bankruptcy. Section 523(a)(8)
provides that educational loans are not dischargeable
“unless excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor and
the debtor's dependents.” 11 U.S.C. §
523(a)(8). “This provision was enacted to prevent
indebted college or graduate students from filing for
bankruptcy immediately upon graduation thereby absolving
themselves of the obligation to repay their student loans.
In re Innes, 284 B.R. 496, 502 (D. Kan. 2002)
(quoting In re Hornsby, 144 F.3d 433, 437 (6th Cir.
1998)). The Tenth Circuit in Polleys further
examined § 523(a)(8)'s legislative history, noting
that the Report of the Commission on Bankruptcy also
recommended that the undue hardship exception to discharge
should apply only during the first five years after
graduation, and that thereafter it should be lifted ...