Home Law income He’s a Brunner, man. Supreme Court Refuses To Review Too Rigid...

He’s a Brunner, man. Supreme Court Refuses To Review Too Rigid Standard For Bankruptcy Student Loan Discharge | Patterson Belknap Webb & Tyler LLP


On Monday, the United States Supreme Court dismissed Thelma McCoy’s motion for a writ of certiorari to the United States Court of Appeals for the Fifth Circuit, missing a golden opportunity to standardize the “important and recurring question” of how to determine the type of “undue hardship” that qualifies a debtor for a discharge. student loans under 11 USC § 523 (a) (8). [1]

The Bankruptcy Code generally excludes student loan debt from the general discharge that individual debtors are entitled to receive at the conclusion of their case. 11 USC § 523 (a) (8). But, with one exception, student loan debt is dischargeable in cases where “excluding such debt from discharge under this paragraph would place undue hardship on the debtor and his dependents.” Identifier.

In determining what constitutes “undue hardship”, most courts apply the inflexible and rigorous three-part test adopted by the Second Circuit in Brunner v. New York State Higher Education Services Corp.[2] A debtor who requests the discharge of her student loans under the Brunner the test must show: “(1) that [she] cannot maintain, on the basis of current income and expenses, a “minimum” standard of living for herself and her dependents if she is forced to repay loans; (2) that there are additional circumstances indicating that this state of affairs is likely to persist for a significant portion of the student loan repayment period; and (3) that [she] made good faith efforts to repay the loans. “ [3] If a debtor cannot meet any of these elements, a bankruptcy court in a Brunner the court has little discretion to shape the relief: the request for release must be rejected.

The Eighth Circuit rejected Brunner. It requires courts to consider “all the circumstances” in the case of each debtor.[4] Under this approach, bankruptcy courts must analyze all the “facts and circumstances surrounding each particular bankruptcy case” to determine whether “the debtor’s reasonable future financial resources will sufficiently cover the payment of the student loan debt, while still allowing a level minimum life. “[5]

Relying on this clear division of authority, McCoy presented a compelling case to the Supreme Court for a ruling on the matter.

These approaches differ greatly in both application and results. Whereas the totality approach allows the courts to consider all the relevant facts and circumstances [. . .] the Brunner test categorically disqualifies even the most oppressed debtors from liberation if they do not meet one of its three elements. For example, the fifth circuit in applying the Brunner test requires that a debtor demonstrate a “complete inability” to pay the debt in the future, regardless of whether the debtor’s age, disability or other mental limitations. and physical would otherwise make repayment “undue hardship.”

This case presents an ideal vehicle for resolving the conflict. The lower courts refused the release on the grounds that Ms McCoy might be able to repay part of her student loan debt in the future, which they considered to be determinative under by Brunner second spindle. If Ms McCoy had filed for bankruptcy in aBrunner jurisdiction, the court would have exercised its discretion to consider all the facts relevant to undue hardship, including her age (62), debilitating disabilities (degenerative back pain, fatigue, chronic headaches, panic attacks, depression , etc.) and his exhaustive job search.[6]

Unfortunately, the court failed to act, leaving countless individual debtors – often pro se and with a limited understanding of the complex procedural and substantive requirements of seeking and obtaining discharge – with little real hope of securing the fresh start that bankruptcy promises.

[1] McCoy v. United States, no.20-886, cert. denied, 2021 WL 2519103 (US 21 Jun 2021), Brief for Petitioner (Available at: https://www.supremecourt.gov/DocketPDF/20/20-886/165012/20201230142505658_McCoy%20Cert%20Petition.pdf).

[2]831 F.2d 395, 396 (2d Cir. 1987).

[3] Username.

[4] Long, 322 F.3d 549, 553 (8th Cir. 2003).

[5] Username. at 554-55.

[6] Brief for the petitioner, 2-3.


Please enter your comment!
Please enter your name here