Appeal from the United States Bankruptcy Appellate Panel for the Eighth Circuit.
The opinion of the court was delivered by: Wollman, Circuit Judge.
Submitted: December 15, 2010
Before WOLLMAN, MURPHY, and COLLOTON, Circuit Judges.
The Educational Credit Management Corporation (ECMC) appeals from the judgment of the bankruptcy court, later affirmed by the Bankruptcy Appellate Panel (BAP), which discharged the student loan debt of Michele D. Walker (Walker) under the "undue hardship" provision of 11 U.S.C. § 523(a)(8). We affirm.
We summarize the relevant facts as outlined in Walker v. Education Credit Management Corp., 427 B.R. 481 (8th Cir. B.A.P. 2010). Walker accumulated student loan debt to fund her undergraduate education at the University of Illinois, from which she graduated in 1989. She completed a medical school preparatory program at Creighton University and then enrolled in the University of Illinois College of Medicine. After her second year of medical school, Walker failed her initial state licensing exam and was dismissed. When her appeals for re-entry were denied, Walker worked as a pharmacy technician and substitute teacher. She met Troy Walker, a police officer, and married him in 1996. She entered a master's program at Governor State University in 1997, graduating with a degree in school psychology in 2000. She funded this part of her education with private loans that are not implicated in her discharge petition.
The Walkers have five children -the oldest born in 1998, one set of twin boys born in 2000, and a second set of twins born in 2001. In 2002, the Walkers moved from Chicago, Illinois, to Minneapolis, Minnesota, where Walker began a full-time post-graduate internship as a school psychologist with the Minneapolis Public Schools, earning between $16,000 and $17,000 annually. Walker worked for the school district for another year, but was unable to continue because her position was cut. After her internship ended, Walker cared for her children, devoting much of her time to the older set of twins, who had been diagnosed with autism in 2003.
In 2004, the Walkers moved from Minneapolis to Hudson, Wisconsin, where they remain. Troy retained his position with the Minneapolis police department and moonlighted as a security officer during his off hours. Walker has not worked outside of the home since 2004. She filed a Chapter 7 bankruptcy petition in April 2004 and received her discharge three months later. That discharge had no effect on her student loan debt because she did not seek an undue hardship determination until 2007, when she initiated this proceeding. By that time, her five children were attending Wisconsin public schools, including the autistic twins, who have been mainstreamed.
In 2008, the autistic twins were accepted into the Wisconsin Early Autism Project, a state-funded program of intensive, in-home therapy for children with autism that entailed eight to nineteen hours during the week, plus eight hours each Saturday and Sunday. A parent must be present for the therapy sessions, and Walker fulfilled that obligation. In addition, she spent about two hours per day preparing for the session and remained available to respond to calls from the school if either of the autistic twins had a "meltdown" at school. Setting aside time to care for the twins or to respond to calls from their school made it difficult for Walker to keep a regular schedule that would permit her to work outside the home, even on a part-time basis. Additionally, because the older twins are eligible for full participation in the state-funded autism program for only a three-year period, Walker anticipates that their total session time will be reduced to ten to twenty hours per month at some point in 2011.
From 2004 to 2007, the Walkers' combined adjusted gross income, derived exclusively from Troy's employment, ranged from $59,019 to $67,639. In 2007, Walker enrolled in an associate's degree program to become a registered nurse, with the aim of earning supplemental income. She left the program after one semester, however, because she could not care for her children and attend school at the same time. The Walkers incurred two sizeable debts during this period that are relevant to our analysis below. In 2005, they took out a $50,000 home equity loan, $30,000 of which went to build a screened-in deck on their home in Wisconsin, with a monthly payment of $373.52. In 2007, Troy purchased a new Chevrolet Suburban for $40,000, with a monthly payment of $850. At that time, the family owned a 1998 minivan, a 2004 minivan, and a 1998 sedan that had been loaned to Walker's mother.
In 2007, Walker filed an adversary proceeding seeking to discharge roughly $300,000 in student loan debt under the undue hardship provision of § 523(a)(8) of the Bankruptcy Code. The parties agree that Walker is eligible for enrollment in the Ford Program's Income Contingent Repayment Plan (ICRP), set forth in 34 C.F.R. § 685.209. They also agree that based on a household adjusted income of $67,639 and a family of seven, Walker would have a monthly payment of $593.98 under the ICRP.
We review de novo whether excepting a debtor's student loan debt from discharge constitutes an undue hardship. Long v. Educ. Credit Mgmt. Corp. (In re Long), 322 F.3d 549, 553 (8th Cir. 2003). We review for clear error the subsidiary findings of fact on which this legal conclusion is based. Reynolds v. Pa. Higher Educ. Assistance Agency, 425 F.3d 526, 531 (8th Cir. 2005). We will not upset those findings of fact unless, after reviewing the entire record, we are left with the definite and firm conviction that a mistake has been made. Cumberworth v. U.S. Dept. of Educ. (In re Cumberworth), 347 B.R. 652, 657 (8th Cir. B.A.P. 2006).
Section 523(a)(8) of the Bankruptcy Code provides that debts from educational loans "made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit," may not be discharged unless "excepting such debt from discharge . . . will impose an undue hardship on the debtor and the debtor's dependents." The debtor has the burden of establishing undue hardship by a preponderance of the evidence. To assess whether the debtor has met this burden we apply a totality-of-circumstances test, under which we consider (1) the debtor's past, present, and reasonably reliable future financial resources; (2) a calculation of the reasonable ...