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In re Piccinino

United States Bankruptcy Appellate Panel of the Eighth Circuit

December 7, 2017

In re: Amy N. Piccinino Debtor
U.S. Department of Education Defendant-Appellee Amy N. Piccinino Plaintiff- Appellant Aspire Resources, Inc. Defendant - Appellee

          Submitted: November 7, 2017

         Appeal from United States Bankruptcy Court for the Eastern District of Missouri

          Before SALADINO, Chief Judge, SHODEEN and DOW, Bankruptcy Judges.


         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.


         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 the evidence of Piccinino's unique and unusual circumstances in reaching its conclusion that she does not qualify for discharge of her student loans.


         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).


         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 ...

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