Kring v. Citibank, N.A. (In Re Kring) , 208 B.R. 73 ( 1997 )

208 B.R. 73 (1997)

In re James and Diane KRING, Debtors.
James and Diane KRING, Plaintiffs,
v.
CITIBANK, N.A., California Student Loan Commission, Defendants.

Bankruptcy No. 96-10531-H7, Adversary No. 96-90925-H7.

United States Bankruptcy Court, S.D. California.

April 15, 1997.

Shirley D. Lyman, El Cajon, CA, for Debtors.

Citibank N.A., Fairport, NY, for Defendant Citibank.

California Student Loan Com'n, Sacramento, CA, for Defendant Cal. Student Loan Com'n.

MEMORANDUM DECISION DENYING REQUEST TO ENTER DEFAULT JUDGMENT

JOHN J. HARGROVE, Bankruptcy Judge.

At issue is whether James and Diane Kring ("Debtors") have provided the proof necessary to support a default judgment for the dischargeability of their student loans under 11 U.S.C. § 523(a)(8).

This Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § § 1334 and 157(b)(1) and General Order No. 312-D of the United States District Court, Southern District of California. This is a core proceeding under § 157(b)(2)(I).

FACTS

On August 2, 1996, Debtors filed their Chapter 7 petition. On December 6, 1996, Debtors filed a complaint to determine the dischargeability of their student loans. Debtors alleged in their complaint that they took out a loan in the amount of $7,084.06 on or about March 1, 1984, and another loan in the amount of $7,483.02 on or about September 26, 1981. Debtors further alleged that the notes provided that repayment of principal, together with interest thereon, shall be made over a period commencing six months after the student was no longer enrolled in school, and payable in monthly installments of $60.00 regarding James Kring and $65.00 regarding Diane Kring. According to Debtors, due to circumstances which they could not justly be held accountable, they were unable to make the ongoing payments on the notes. Finally, Debtors alleged that their bankruptcy petition was filed seven years after the beginning date of the repayment period of the debt. Debtors requested the Court to find that excepting their debt from discharge would be an undue hardship.

On March 26, 1997, Debtors filed a request to enter a default and a declaration of their attorney in support of the request. Debtors' attorney declared that the complaint was filed and that on January 3, 1997, Debtors served the summons and complaint on defendants, Alaska Student Loan Program.^[1] Debtors' attorney further declared that no answer or responsive pleading had been filed in the case.

The Court returned Debtors' request for entry of default unsigned because Debtors had failed to provide any competent evidence regarding proof of the allegations in the complaint.

Subsequently, Debtors resubmitted another request to enter the default judgment along with their own declaration in support of the request. Debtors' declaration essentially reiterates the allegations stated in the complaint word for word.

DISCUSSION

Default judgments are governed by Fed.R.Civ.P. 55, which is made applicable to bankruptcy proceedings by Fed. R. Bankr.P. 7055. "Courts have wide discretion in deciding whether or not to enter a default judgment under Fed.R.Civ.P. 55. Bankruptcy courts are accordingly provided the discretion to require proof of the facts necessary to determine a valid claim for relief against the defaulting parties." In re Beltran, 182 B.R. 820 (9th Cir. BAP 1995).

Debtors have failed to provide the Court with any competent evidence of facts establishing their claim for relief. Statements that the complaint was served, but not answered, or simply reiterating allegations contained in the complaint are insufficient evidence to prove-up the dischargeability of Debtors' student loans. Legal conclusions, without any supporting facts, are likewise insufficient.

For student loan debt to be dischargeable on the basis of "undue hardship", a debtor must show (1) that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for self and dependents if forced to repay loans, (2) that additional circumstances exist indicating that the 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. Brunner v. New York State Higher Education Services, Corp., 831 F.2d 395, 396 (2d Cir.1987); See In re Holtorf, 204 B.R. 567 (Bankr.S.D.Cal.1997) (analysis of the good faith prong of the Brunner test). There is no evidence before this Court that meets any of the requirements for a discharge based on undue hardship.

Moreover, Debtors have failed to provide any evidence that their petition was filed seven years after the beginning date of the repayment period. See In re Thorson, 195 B.R. 101 (9th Cir. BAP 1996).

Accordingly, Debtors' request to enter the default judgment is denied without prejudice.

CONCLUSION

This Memorandum Decision constitutes findings of fact and conclusions of law pursuant to Federal Rule Bankruptcy Procedure 7052.

NOTES

[1] The Court notes that Alaska Student Loan Program is not a named defendant in this lawsuit nor does the proof of service show that Alaska Student Loan Program was ever served.