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Can a Debtor Establish “Undue Hardship” Despite the Availability of an “Income-Based Repayment” Program with No Payment Due in a Bankruptcy Proceeding?

Yes! As reported by Robin Miller of CBAR, affirming  In re Al-Riyami, 2014 WL 2800815 (Bankr. M.D. Ala., Jan. 6, 2014), the district court found no error in the bankruptcy court’s determination under Code § 523(a)(8) that requiring the debtor to repay her student loans would cause her undue hardship, even though, under an income-based repayment program offered the U.S. government, a repayment plan would “allow for an adjusted payment amount” as low as $0.00 per month.

Debtor’s lack of income was likely to persist into foreseeable future:

The bankruptcy court’s factual findings were not clearly erroneous, and those facts supported its legal conclusion that the debtor satisfied the second Brunner element, namely, that the debtor’s “current circumstances are likely to persist into the foreseeable future,” although the debtor had a college degree, a full-time job, mental and physical health, healthy children, and employable years ahead of her. The bankruptcy court found that the debtor, a single mother, would be unable to work in her former higher-paying career because it required overseas deployment that would take her away from the care of her two young children, who were four and eight years old. The bankruptcy court also found that the debtor lacked a marketable degree that would enable her to earn more money than she did in her current job, as demonstrated by her diligent job searches.

U.S. Dept. of Educ. v. Al-Riyami, 2014 WL 1584481 (M.D. Ala., April 21, 2014)

(case no. 3:14-cv-73) (Chief District Judge W. Keith Watkins)