Amy Piccinino v. U.S. Dept. of Education ( 2017 )


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  •            United States Bankruptcy Appellate Panel
    For the Eighth Circuit
    ___________________________
    No. 17-6022
    ___________________________
    In re: Amy N. Piccinino
    Debtor
    ------------------------------
    Amy N. Piccinino
    Plaintiff - Appellant
    v.
    U.S. Department of Education
    Defendant - Appellee
    Aspire Resources, Inc.
    Defendant - Appellee
    ____________
    Appeal from United States Bankruptcy Court
    for the Eastern District of Missouri
    ____________
    Submitted: November 7, 2017
    Filed: December 7, 2017
    ____________
    Before SALADINO, Chief Judge, SHODEEN and DOW, Bankruptcy Judges.
    ____________
    SHODEEN, Bankruptcy Judge,
    Plaintiff, Amy Piccinino, appeals from the Bankruptcy Court’s 1 determination that
    she failed to meet her burden of proof to establish an undue hardship pursuant to
    
    11 U.S.C. §523
    (a)(8) to discharge her student loans owing to the United States
    Department of Education and Aspire Resources, Inc. For the reasons that follow,
    we affirm.
    BACKGROUND
    In 2011 Piccinino obtained a bachelor’s degree in anthropology. Following
    graduation she participated in a volunteer internship position in her field of study.
    From 2011 until May 2013 Piccinino did not work. Since that time she has only
    worked in part-time positions. To finance her education Piccinino borrowed funds
    from Department of Education (“DOE”), Aspire Resources, Inc. 2 (“Aspire”) and
    The Scholarship Foundation.      No payments have been made on any of these
    student loans and at the time of trial these lenders were owed more than $79,000.
    In a detailed ruling the Bankruptcy Court concluded that the DOE and
    Aspire loans were not eligible for discharge based upon undue hardship. 3
    Piccinino appeals this decision raising two primary arguments. First, that the
    Bankruptcy Court engaged in speculation related to her employment history,
    search for employment, future employment and her housing expense. Second, that
    the Bankruptcy Court committed error by misinterpreting, discounting or ignoring
    1
    The Honorable Barry S. Schermer, United States Bankruptcy Judge for the
    Eastern District of Missouri.
    2
    Aspire services the loan on behalf of Iowa Student Loan Liquidity Corporation,
    the holder of the promissory note.
    3
    The Bankruptcy Court concluded that the obligation owed to The Scholarship
    Foundation was subject to discharge and that determination was not appealed.
    the evidence of Piccinino’s unique and unusual circumstances in reaching its
    conclusion that she does not qualify for discharge of her student loans.
    STANDARD OF REVIEW
    The determination of undue hardship is a legal conclusion subject to de novo
    review. Long v. Educ. Credit Mgmt. Corp. (In re Long), 
    322 F.3d 549
    , 553 (8th
    Cir. 2003).   Subsidiary findings of fact underlying any legal conclusions are
    reviewed for clear error. Educ. Credit Mgmt. Corp. v. Jesperson, 
    571 F.3d 775
    ,
    779 (8th Cir. 2009). This standard requires a reviewing court to conclude that the
    trial court made a definite mistake based upon the record as a whole. United States
    v. United States Gypsum Co., 
    333 U.S. 364
    , 395 (1948). The trial court’s findings
    of fact are given deference and when more than one interpretation of evidence is
    possible there is no clear error. Anderson v. Bessemer City, 
    470 U.S. 564
    , 574
    (1985).
    DISCUSSION
    Student loans can only be discharged in bankruptcy when repayment would
    constitute an “undue hardship on the debtor [or] the debtor’s dependents . . .” 
    11 U.S.C. § 523
    (a)(8). It is the plaintiff’s burden to prove an undue hardship by a
    preponderance of the evidence. Grogan v. Garner, 
    498 U.S. 279
    , 289-91 (1991).
    The term “undue hardship” is not defined by the Bankruptcy Code leaving the
    courts to develop standards to evaluate whether such a condition exists.         A
    majority of courts follow the test adopted by the Second Circuit in Brunner v. New
    York State Higher Education Services Corp. 
    831 F.2d 395
    , 396 (2d Cir. 1987).
    The Eighth Circuit expressly rejected the Brunner analysis in favor of a more
    flexible totality of the circumstances test to assess whether repayment of student
    loans would constitute an undue hardship.          In re Long, 
    322 F.3d at 553-54
    ;
    Shadwick v. U.S. Dep’t of Educ., 
    341 B.R. 6
    , 11 (Bankr. W.D. Mo. 2006). This
    test establishes three areas of inquiry:       “(1) the debtor’s past, present, and
    reasonably reliable future financial resources; (2) a calculation of the debtor’s and
    [any] dependent’s reasonable necessary living expenses; and (3) any other relevant
    facts and circumstances surrounding each particular bankruptcy case.” In re Long,
    
    322 F.3d at 554
    .
    1.      Past, Present and Future Financial Resources
    Piccinino is a thirty-year-old single mother to a six-year-old daughter for
    whom she receives no child support. Her annual income from 2013 through 2015
    ranged from $4,250 to $9,674 from part-time employment. Piccinino’s current
    monthly income is derived from her employment at $850 per month as a substitute
    teacher during the school year and $800 per month in July and August when she
    provides childcare. Monthly SNAP benefits in the amount of $319 supplement her
    monthly income. She and her daughter are also qualified for Medicaid assistance.
    In 2016 Piccinino received a federal income tax refund in the amount of $4,364 4.
    The Bankruptcy Court found that the combination of all of these sources indicate
    that Piccinino’s annual income is $17,442, which amounts to $1,453.50 a month.
    Piccinino raises only one issue with this income finding. She argues that it is
    incorrect to include a portion of her tax refund as part of her monthly income
    because it is received annually in a lump sum. Due to the variances in Piccinino’s
    income throughout the year it is appropriate for this amount to be averaged and
    included as part of her available monthly financial resources.
    The Bankruptcy Court found that: "Although some limitations on the
    Debtor’s retention of full-time employment have been out of her control, the
    4
    There was no evidence provided as to any state income tax refunds received.
    Debtor’s underemployment is, to a certain extent, self-imposed." Piccinino also
    challenges the Bankruptcy Court's "speculative conclusion that her working only
    part-time has been voluntary" and references a notebook5 that contains details
    about her unsuccessful attempts to obtain employment in 2011 and 2012. The
    record reflects that she has made employment choices based upon restrictions she
    has imposed. She decided not to work at all for a two year time period. After
    2012 there is no evidence that she considered full-time employment as an option.
    Due to her lack of family support Piccinino justifies her part-time work because
    she must care for her daughter. She also states that she is unable to obtain work
    that will pay enough to cover the cost of childcare, although she presented no
    evidence to support this assertion. Piccinino appears to suggest that her minimal
    income and part-time work is inevitable and serves to predict her future earning
    capability. This position fails to acknowledge that when her daughter starts school
    her need for childcare will naturally decrease. Piccinino rejects this analysis
    claiming that there will be additional expenses for her daughter related to school
    and other activities that will offset any childcare savings. The record contains no
    quantitative detail to support this opinion.
    Based upon the evidence of her age, health, skill sets and abilities Piccinino
    has failed to meet her burden to demonstrate that her future employment
    opportunities will not result in higher wages and full time employment. See
    Jesperson, 
    571 F.3d at 780
    .
    5
    The docket reflects that Piccinino filed a document described as “Designation of
    Items to be Included in Record of Appeal,” but the identified exhibits were not
    transmitted to the Clerk for docketing. Consequently, a review of the facts under
    the clearly erroneous standard is necessarily limited to the trial transcript and the
    exhibits identified and supplied by the DOE and Aspire in their joint Designation
    of Record on Appeal which does not include the notebook referenced by Piccinino.
    2.    Reasonable and Necessary Living Expenses
    “To be reasonable and necessary, an expense must be ‘modest and
    commensurate with the debtor’s resources.’” 
    Id.
     (citing DeBrower v. Pa. Higher
    Educ. Assistance Agency, 
    387 B.R. 587
    , 590 (Bankr. N.D. Iowa 2008)). A debtor
    is entitled to “sufficient financial resources to satisfy needs for food, shelter,
    clothing and medical treatment" to maintain a minimal standard of living. Nielsen
    v. ACS, Inc. (In re Nielsen), 
    473 B.R. 755
    , 760 (B.A.P. 8th Cir. 2012) (citing
    Brown v. Am. Educ. Servs., Inc., 
    378 B.R. 623
    , 626 (Bankr. W.D. Mo. 2007)). If
    Piccinino’s “reasonable future financial resources will sufficiently cover payment
    of the student loan debt - while still allowing a minimal standard of living - then
    the debt should not be discharged.” Jesperson, 
    571 F.3d at
    779 (citing In re Long,
    
    322 F.3d at 554-55
    ).
    Piccinino’s current monthly income is $1,453.50 and she identifies monthly
    expenses totaling $1,476.00. Taken at face value there is a shortfall between her
    income and expenses in the amount of $22.50 a month. On appeal Piccinino
    argues that this information was submitted in an effort to provide general
    information as to her “fixed expenses” and does not include other variable monthly
    expenses. She defines these variable expenses as “very real and occur normally in
    each of our lives” and as not being easily quantified. No insight into the number or
    amounts of anticipated variable expenses was supplied which prevents any such
    items from being considered in evaluating Piccinino’s reasonable and necessary
    living expenses.
    Piccinino argues the Bankruptcy Court speculated her mother would forego
    rent payments so the student loan obligations could be paid. The actual amount of
    her monthly housing expense was called into question. Piccinino states that she
    pays monthly rent of $500 to live in a portion of her mother’s home. This amount
    is admittedly based upon what would be charged to an unrelated third party. There
    is no agreement in place between mother and daughter as to the amount of rent to
    be charged and no records have been kept to reflect the amounts that have actually
    been paid. With her mother’s consent she pays rent when she can in any amount.
    Piccinino asserts that her mother would like to sell the home which will result in a
    future rent expense. Due to the lack of evidence that her mother has taken any
    affirmative action to sell the real estate her current intent to do was not
    substantiated. Piccinino bears the burden of proving she has no funds in excess of
    her expenses, and therefore cannot make payments towards her student loans.
    Based upon the parties’ arrangement it is plausible to conclude that Piccinino’s
    rent expense is less than $500, is not routinely paid and therefore changes the net
    amount of her available monthly income. See Jesperson, 
    571 F.3d at 780
    ; see
    Hurst v. S. Ark. Univ., 
    553 B.R. 133
    , 138 (B.A.P. 8th Cir. 2016).
    Prior to filing bankruptcy Piccinino contacted each of her lenders to request
    a modification of her student loans. Notwithstanding her position that she lacks
    sufficient net income to pay her student loans, Piccinino’s offers to make modest
    payments to her lenders indicate she believes she is able to pay some amount on
    her loans.
    Based on the foregoing, the Bankruptcy Court found Piccinino has sufficient
    income in excess of her expenses to make modest monthly payments to her
    lenders. This conclusion is amply supported by the evidence.
    3.    Other Relevant Facts and Circumstances
    This factor permits evaluation of a wide range of facts and issues that may
    be relevant to determining undue hardship, including:
    (1) total present and future incapacity to pay debts for
    reasons not within the control of the debtor; (2) whether
    the debtor has made a good faith effort to negotiate a
    deferment or forbearance of payment; (3) whether the
    hardship will be long-term; (4) whether the debtor has
    made payments on the student loan; (5) whether there is
    permanent or long-term disability of the debtor; (6) the
    ability of the debtor to obtain gainful employment in the
    area of the study; (7) whether the debtor has made a good
    faith effort to maximize income and minimize expenses;
    (8) whether the dominant purpose of the bankruptcy
    petition was to discharge the student loan; and (9) the
    ratio of student loan debt to total indebtedness.
    Brown, 378 B.R. at 626-27 (citing VerMaas v. Student Loans of N.D. (In re
    VerMaas), 
    302 B.R. 650
    , 656-57 (Bankr. D. Neb. 2003); Morris v. Univ. of Ark.,
    
    277 B.R. 910
    , 914 (Bankr. W.D. Ark. 2002)). These numerous factors do not
    provide an exclusive list of items that courts may consideration and also do not
    require a court to address each and every one in a particular case.
    Self-imposed restrictions are relevant to a determination of undue hardship.
    Jesperson, 
    571 F.3d at
    782 (citing Loftus v. Sallie Mae Servicing, 
    371 B.R. 402
    ,
    410-11 (Bankr. N.D. Iowa 2007)). Piccinino’s employment decisions and her
    perception of future employment prospects reflect elements of self-imposed
    conditions which weigh against dischargeability.
    Piccinino explains that she sustained a shoulder injury in a car accident at
    the fault of an uninsured driver which required some medical attention. She also
    has dental concerns which she cannot afford to address. No medical evidence was
    supplied to demonstrate that these conditions have resulted in an impairment that
    prevents Piccinino from working.
    The availability of a repayment plan is another singular factor that can be
    considered when evaluating whether undue hardship exists. Lee v. Regions Bank
    Student Loans, 
    352 B.R. 91
    , 95 (B.A.P. 8th Cir. 2006). “[A] student loan should
    not be discharged when the debtor has ‘the ability to earn sufficient income to
    make student loan payments under the various special opportunities made available
    through the Student Loan Program.’” Jesperson, 
    571 F.3d. at
    781 (citing In re
    VerMaas, 
    302 B.R. at 660
    ).       The DOE approved Piccinino’s application to
    participate in the Income Driven Repayment Plan which permits her to pay as she
    earns. Based upon her current circumstances the monthly payment calculated
    under this program is $0.00. No clear error is present in the Bankruptcy Court
    finding that Piccinino has sufficient funds to make these payments.
    Piccinino points to taxes she may owe at the end of the repayment period as
    an additional basis for discharge of her student loans.       We have previously
    concluded that the “mere possibility” of tax liability is not dispositive of undue
    hardship. In re Nielsen, 473 B.R. at 762.
    Whether the dominant purpose of a bankruptcy filing is to discharge student
    loans is also relevant to a determination of undue hardship.          Admittedly,
    Piccinino’s filing was done in an attempt to eliminate her student loan debt. This
    intent is further corroborated by the ratio of student loan debt which constitutes
    over 98% of her total debt.
    CONCLUSION
    For the reasons stated above, Piccinino has failed to demonstrate that any of the
    factual findings by the Bankruptcy Court were clearly erroneous. Further, the
    Bankruptcy Court carefully analyzed the facts presented under the relevant
    categories and nothing in our de novo review of the record supports a different
    outcome. Accordingly, the Bankruptcy Court’s order is AFFIRMED.
    ________________________