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In re Thomas

United States Court of Appeals, Fifth Circuit

July 30, 2019

In the Matter of: VERA FRANCES THOMAS Debtor
v.
DEPARTMENT OF EDUCATION, Appellee VERA FRANCES THOMAS, Appellant

          Appeal from the United States District Court for the Northern District of Texas

          Before JONES, HO, and OLDHAM, Circuit Judges.

          EDITH H. JONES, CIRCUIT JUDGE

         Appellant Thomas challenges the bankruptcy court's denial of discharge of her student loan debt pursuant to 11 U.S.C. § 523(a)(8). This court, like the bankruptcy and district courts, is bound by our previous interpretation of the discharge provision in In re Gerhardt, 348 F.3d 89 (5th Cir. 2003). Finding no error, we AFFIRM.

         I. Factual Background

         Vera Frances Thomas, the Appellant, is over 60 years old and had to file a Chapter 7 bankruptcy case in 2017. Ms. Thomas suffers from diabetic neuropathy, a degenerative condition that causes pain in her lower extremities. Ms. Thomas is now unemployed and subsists on a combination of public assistance and private charity. In February 2012, however, she had worked for eight years at a call center in Southeastern Virginia and was earning $11.40 per hour with benefits. That year, Ms. Thomas decided to enroll at a local community college to improve her career prospects (she had a high school diploma, but no higher education credits). She obtained two $3, 500 loans through the Department of Education, the first on February 14, 2012 and the second on September 21, 2012 to finance her first two semesters of courses. Ms. Thomas did not return for a third semester, and her loans went into repayment in December 2013. In spring 2014, she made payments of $41.24 and $41.61 on the loans.

         Ms. Thomas's health began to decline significantly in 2014 when she was diagnosed with diabetic neuropathy. The condition, which often reduces circulation in patients' lower extremities, caused muscle weakness, numbness, and pain in her legs and feet after prolonged standing. Ms. Thomas frequently took unpaid leave from work at the call center to manage her symptoms and incurred significant medical expenses. In 2016, her employer was acquired by another company, and the new employer fired her for violating company policies. Because she was terminated for cause, Ms. Thomas was ineligible for unemployment benefits.

         To defray costs, Ms. Thomas moved to Texas to live with her then-boyfriend. She obtained work with Perfumania, then Whataburger, and finally UPS. But each job required her to be on her feet, and she could not maintain these positions. Since quitting UPS in 2017, Ms. Thomas has not obtained employment that comports with her need for sedentary work.

         Unable to make payments on her student loans and other significant debts, Ms. Thomas filed Chapter 7 bankruptcy in Dallas and received a general discharge of her debts. Seeking a discharge of her student loan debt as well, Ms. Thomas initiated an adversary complaint in bankruptcy court against the Department of Education.

         II. Procedural Background

         To discharge student loan debt under the Bankruptcy Code, a debtor must show that the debt would impose an "undue hardship" on the debtor if it is not discharged. 11 U.S.C. § 523(a)(8).[1] In In re Gerhardt, 348 F.3d 89 (5th Cir. 2003), this court adopted the three-prong test for evaluating "undue hardship" claims established by the Second Circuit in Brunner v. New York State Higher Education Service Corp., 831 F.2d 395 (2d Cir. 1987). To justify the discharge of student loan debt under this test, a debtor must prove:

(1) that the debtor cannot maintain, based on current income and expenses, a 'minimal' standard of living for [herself] and [her] dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.

Gerhardt, 348 F.3d at 91 (quoting Brunner, 831 F.2d at 396).

         The bankruptcy court held a trial to review Ms. Thomas's complaint, applied Gerhardt, and determined that "Ms. Thomas has not met her burden of showing undue hardship under the controlling standard in the Fifth Circuit . . . ." The bankruptcy court concluded that she had satisfied the first prong of Brunner-showing an inability to maintain a minimal standard of living if forced to repay the loan-because her monthly expenses ($640) exceeded her monthly income ($194). Ms. Thomas failed to pass Brunner's second standard, however, because she "conceded that she is unable to show she is completely incapable of employment now or in the ...


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