United States Bankruptcy Appellate Panel of the Eighth Circuit
In re: Chelsea A. Conway Debtor
National Collegiate Trust; First Marblehead Corp., Inc. Defendants-Appellees Chelsea A. Conway Plaintiff-Appellant
Submitted: July 19, 2013
Appeal from United States Bankruptcy Court for the Eastern District of Missouri - St. Louis
Before KRESSEL, SALADINO and SHODEEN, Bankruptcy Judges.
SALADINO, Bankruptcy Judge.
The Plaintiff, Chelsea Conway, appeals the decision of the bankruptcy court finding her student loan obligations to National Collegiate Trust ("NCT") and First Marblehead Corp., Inc. to be nondischargeable. For the reasons stated below, we reverse and remand.
Many of the underlying facts are uncontroverted. On December 7, 2009, Ms. Conway filed for Chapter 7 bankruptcy protection and received a discharge on March 16, 2010. On December 16, 2011, Ms. Conway filed a motion to reopen her case, which motion was granted on December 20, 2011. On January 24, 2012, Ms. Conway filed an adversary proceeding against NCT pursuant to 11 U.S.C. § 523(a)(8) for the purpose of determining dischargeability of her student loans.
Ms. Conway is single and has no dependents. She graduated from Webster University in 2005 with a Bachelor of Arts degree in media communications. She also attended St. Louis Community College both prior to and after attending Webster University. From October 21, 2003, through September 2006, Ms. Conway entered into 15 separate student loan notes with NCT. All 15 notes are educational loans as defined in 11 U.S.C. § 523(a)(8) and were incurred for higher education expenses. The total original balance of all 15 loans was $70, 100.00. As of November 5, 2012, the total balance owed, with interest, was $118, 579.66. The interest rates on the 15 student loans range from 3.25% to 5.150%.
Since August 22, 2005, NCT has granted to Ms. Conway part-time deferments, temporary forbearances, and forbearances on all 15 notes. She has repaid a total of $5, 734.48 to NCT on the 15 student loans. Ms. Conway had additional student loan obligations to Key Bank, N.A. in the amount of $9, 000.00, and Sallie Mae/SLM Corp. in the amount of $11, 000.00, both of which were discharged pursuant to stipulations and bankruptcy court orders approving the stipulations. Ms. Conway also has federally-guaranteed student loans of approximately $18, 000.00 that are not part of this proceeding.
In October 2005, Ms. Conway began working at American Equity Mortgage as a loan sales analyst. In July 2007, she was laid off from that job and began working part-time in various temporary office positions. In December 2007, she began working full-time at Administaff of Texas as a guest specialist. She was laid off from that job in September 2008, and again began working part-time in temporary office positions. In April 2009, she began part-time work as a waitress and held a position at a bank for a short time. Currently, she works two part-time jobs as a restaurant server and, as indicated by the fact stipulation, she earned monthly net income of $2, 040.36 as of July 2012 and $1, 379.97 as of December 2012. Her income tends to fluctuate due to the seasonal business at one of the establishments. Ms Conway states that her monthly expenses (without the NCT debt) are $1, 737.25 and has provided a detailed breakdown of those expenses.
STANDARD OF REVIEW
"Undue hardship 'is a question of law which we review de novo. Subsidiary findings of fact on which the legal conclusion is based are reviewed for clear error.'" Educ. Credit Mgmt. Corp. v. Jesperson, 571 F.3d 775, 779 (8th Cir. 2009) (quoting Reynolds v. Pennsylvania Higher Educ. Assistance Agency (In re Reynolds), 425 F.3d 526, 531 (8th Cir. 2005)). We will not upset the bankruptcy court's findings of fact unless, after reviewing the entire record, we are left with the definite and firm conviction that a mistake has been made. Walker v. Sallie Mae Servicing Corp. (In re Walker), 650 F.3d 1227, 1230 (8th Cir. 2011) (citing Cumberworth v. U.S. Dep't of Educ. (In re Cumberworth), 347 B.R. 652, 657 (B.A.P. 8th Cir. 2006)).
Dischargeability of student loans is governed by 11 U.S.C. § 523(a)(8), which provides, in relevant part, that a discharge under § 727 does not discharge an individual debtor from any debt for student loans, "unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents[.]" In contrast to many other types of debts, § 523(a)(8)'s exclusion of student loans from discharge is "self-executing" in the sense that, "[u]nless the debtor affirmatively secures a hardship determination, the discharge order will not include a student loan debt." Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 450 (2004). A debtor's obligation on a student loan ...