Student Loan Bankruptcy Brunner Test Challenged

In August, NACBA and NCLC filed an amicus brief to the Eleventh Circuit student loan discharge case, Acosta Conniff v. ECMC. The case was appealed from the United States District Court for the Middle District of Alabama. The dispute arose after the bankruptcy court determined that the repayment of Conniff’s outstanding student loan debt, amounting to $112,000, would result in undue hardship. As a result, the bankruptcy court discharged her debt. The District Court held that Conniff failed to show that her inability to pay was likely to continue for a significant time, “such that there [was] a certainty of hopelessness that she will be able to repay the loans within the repayment period. Therefore, Conniff’s student loan debt found not to be dischargeable under 11 U.S.C §523(a)(8).

The amicus brief aims to convince the court to abandon the Brunner hardship test, arguing that the four-part test is ‘obsolete’ and strays too far from the plain language of 11 U.S.C §523. Section 523(a) states, in relevant part, “A discharge under §727, 1141, 1228(a), 1228(b), or 1328(b) of the title does not discharge an individual debtor from any debt… unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents.”

The Brunner test was developed at a time when student loans could be discharged automatically five years after they were due. To satisfy the elements of the Brunner test, the debtor must prove:

(1) he or she cannot maintain, based on his or her current income and expenses, a minimal standard of living for the debtor and his or her dependents if forced to pay off the student loans;

(2) additional circumstances exist that indicated that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(3) he or she has made a good faith effort to repay the loans.

The Brunner case addressed debtors attempting to discharge their loans immediately rather than waiting five years. However, the brief argues that under current bankruptcy and debt laws, these discharges are no longer available. Additionally, creditors now have access to various remedial actions that were not available at the time Brunner was decided.

If the court does not decide to abandon Brunner, the amici argue that its application must conform to the text of Section 523(a)(8). Discharge should be based on facts, rather than conjecture or speculation. The brief also comments on the morality-based analysis that the courts have used when examining a debtor’s past life choices that may have contributed to his or her financial distress. The amici advocate a new standard that evaluates undue hardship as “requiring that the debtor show that repayment of the student loan would prevent the debtor from satisfying ordinary and necessary living expenses to that a debtor could not effectively make ends meet.” The Court should consider realistic and reasonable expenses and the debtor’s ability to maintain the necessities of life and the standard for discharge should be construed as something less that “certainty of hopelessness.”