Cline v. Illinois Student Loan Assistance Ass'n (In Re Cline)

KRESSEL, Bankruptcy Judge.

The debtor, Julie Ann Cline, filed an adversary proceeding against the Illinois Student Loan Assistance Association seeking a determination that excepting her student loan obligations to ISLAA from her Chapter 7 discharge would constitute an undue hardship pursuant to 11 U.S.C. § 523(a)(8). The bankruptcy court¹ found that Cline’s student loan debt was discharged on the basis of undue hardship. ISLAA appeals. Because the findings of the bankruptcy court are not clearly erroneous, we affirm.

BACKGROUND

Cline is thirty-five years old and single with no dependents. She holds a bachelor’s degree in psychology and sociology from Southwest Bible College and a master’s degree in sociology from Central Missouri State University. Cline financed her education with student loans, which she consolidated after earning her master’s degree. The balance due ISLAA on the consolidated student loan exceeds $53,522. Over the course of a decade, Cline has made two payments.

ISLAA offers a variety of repayment plans. Under the standard repayment plan, Cline’s obligation is payable over ten years in monthly installments of $613. Under the extended plan, the loans are payable over twelve to thirty years in monthly installments of $394. Under the graduated plan, Cline’s monthly payments would begin at $344 with periodic increases over a repayment term of twelve to thirty years. Finally, under the income contingent plan, Cline’s monthly payments would be $283 for thirty-five years.

Although Cline is highly educated and works in her field as a caseworker for the Missouri Department of Family Services, her income has been modest. In 1999, she earned approximately $25,000. In 1998 and 1997, Cline earned approximately $24,-000. In 1996, her annual income was approximately $22,500.

Cline’s duties consist of assisting people seeking food stamps and medical and other forms of public assistance with the application process. Three times Cline succeeded in obtaining a higher responsibility and slightly higher pay position but in each instance she lasted only a few months in the new job and voluntarily returned to her caseworker position. According to Cline, the other positions involved more stress than she could handle. Apparently Cline cannot manage responsibilities in excess of simple, repetitive tasks.

Cline filed her petition for relief under Chapter 7 on May 21, 1999. In her schedules and statement of financial affairs she listed net monthly income of $1,424 and total monthly expenses of $1,438. In fact, her net monthly income is $1,578, and she sometimes has an opportunity to work overtime that could net from as little as $65 to as much as $284 extra in a given month.

In her bankruptcy schedules, Cline listed expenses that the court properly found were modest and reasonable. Her monthly expenses included rent of $465, food including special dietary items of $200, $20 for medical and dental expenses, $73 for car insurance, up to $130 for car use and maintenance, $50 for recreation, $30 for cable television, $25 for charitable contributions, and a $50 payment on a nondis-chargeable state tax obligation. Cline’s schedules also included a $250 monthly car payment. However, she has since paid off the loan on the car. The court found that, nevertheless, Cline would require that $250 each month in maintenance of her car and eventually payments on a new car.

DISCUSSION

We review the bankruptcy court’s factual findings for clear error and its conclusions of law de novo. Johnson v. Border State Bank (In re Johnson), 230 B.R. 608, 609 (8th Cir. BAP 1999); Eilbert v. Pelican (In re Eilbert), 162 F.3d 523, 525 (8th Cir.1998). The determination that requiring a debtor to repay student loans would constitute an undue hardship is a factual finding and is reversible only for clear error. See Andresen v. Nebraska Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 128 (8th Cir. BAP 1999).

Section 523(a)(8) of the Bankruptcy Code provides:

(a) 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—

(8) 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 any 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).

Undue hardship is not defined by the Code. In the Eighth Circuit, the test for undue hardship is the totality of the circumstances, with particular attention to the debtor’s current and future financial resources, necessary reasonable living expenses for the debtor and the debtor’s dependents, and any other facts unique to the particular bankruptcy case. See Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir.1981); see also Andresen, 232 B.R. at 139-40.

Admittedly, this is a case that could be determined either way. There are several factors that would support a determination that Cline could manage to repay her student loans, albeit with an extraordinary effort but perhaps not crossing the threshold of undue hardship. Cline is a healthy thirty-five year old person with no dependents. She is highly educated and has worked in the field of her bachelor and master degrees for twelve years. She has modest expenses, and a monthly surplus of perhaps as much as $328.

On the other hand, there is no shortage of circumstances that also support the bankruptcy court’s finding that requiring Cline to repay her student loans would constitute an undue hardship. While Cline’s trained profession is social work, as a case worker for the state department of social services, she has never earned more than $25,000 in one year. She has never been able to afford her student loan payments. She has only made two payments in a ten year period.

She also has a $2000 nondischargeable tax debt payable at $50 a month, and she will eventually require a new car. Moreover, even under the smallest payment plan, Cline would expend virtually all of her already questionable surplus for thirty-five years to finally repay her student loans. She would be seventy years old when her loans are paid, assuming she makes the payments as scheduled, and encounters no other financial or health problems.

Cline lives very modestly. She rents a unit in a duplex from her father for $465 per month and her other expenses are minimal. Not including a car payment that the bankruptcy court found would eventually be a required expense, her minimal monthly expenses are approximately $1258. Her take home pay is $1578, admittedly $154 more than the bankruptcy court found. While Cline has earned overtime, there was no evidence that overtime was either always available or mandatory, and no assurance that Cline could handle continuous overtime.

The bankruptcy court determined that Cline could endure only work that was essentially ministerial and that she suffered from the stress of increased responsibility due to a lack of self-confidence. While there was no evidence that the debt- or was clinically disabled or maladjusted, the bankruptcy court expressly found that Cline was not fit for the higher responsibility and higher paying positions she tried and then left. There is no reason to view the trial court’s findings as unreliable merely because no expert evidence was introduced. The record offers no reason to suggest that the bankruptcy court made its decision without due consideration. The bankruptcy court .took evidence, judged the debtor’s credibility, and applied the proper totality of the circumstances test. Its finding of undue hardship is not clearly erroneous.

It is not our place to re-evaluate the evidence, especially when the proper legal test was applied. In this case, the bankruptcy judge properly cited and applied the totality of the circumstances test for undue hardship set forth by the Eighth Circuit in Andrews, and in our recent opinion in Andresen. The bankruptcy court carefully analyzed the debtor’s current and future financial resources, reasonable living expenses, and any other relevant facts or circumstances. It was in a position to determine Cline’s credibility, and its’ conclusion is not unsupported by the record.²

In a case like this that could be construed either way, we are not at liberty to second guess the bankruptcy court’s findings. We are to look for clear error only, and there is nothing clearly erroneous about the court’s ruling in this case.

While the court appears to have underestimated Cline’s monthly income by $154, it is of no moment because the bankruptcy court did not rely exclusively on Cline’s limited income earning capacity, and because her expenses are probably underestimated. The court expressly decided that Cline’s lack of self-confidence was the reason that she could not maintain higher paying employment. Indeed, the transcript of the proceedings suggests a tearful and at times shameful debtor. The court did not let Cline win an undue hardship discharge because she voluntarily limited her earning capacity. Instead, the court found that the Cline was unable to maintain a job that paid a higher income.

In addition, the court’s determination of undue hardship would survive clear error review even without the element of the Cline’s fragile resistance to stressful work because her financial situation alone is highly precarious. An inevitable future car payment, the tax debt payments, and the fact that her expenses were already estimated minimally render what appears to be a $320 monthly surplus more likely to be barely enough to make ends meet. The bankruptcy court’s conclusion that Cline will never be able to afford payments on her student loans, not even at $283 a month spread out over thirty-five years on the income contingent repayment plan, is not clearly erroneous. She has never been able to afford the payments, and even if her income increases slightly over the years, so will her expenses, and she will likely not be able to afford the payments in the future either.

Finally, going over Cline’s expenses dollar for dollar in order to find every possible way to boost a surplus is not reasonable given that the overall total remains firmly minimal. There are no luxuries to reduce in this case; it cannot be clear error for the bankruptcy court to have failed to require the debtor to abandon $25 a month in charitable donations or to obtain a roommate to share expenses with her for the next thirty-five years.

CONCLUSION

The judgment of the bankruptcy court determining that the debtor’s debt to the defendant is not excepted from her discharge is affirmed.

1 . The Honorable Arthur B. Federaran, Chief Judge, United States Bankruptcy Court for the Western District of Missouri.

2 . See Anderson v. City of Bessemer, 470 U.S. 564, 575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (holding that only the trial judge can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener's understanding of and belief in what was said).