ECMC v. Acosta-Conniff

Filing 41

MEMORANDUM OPINION AND ORDER: for the foregoing reasons, directing that the bankruptcy court must make additional findings of fact and conclusions of law as to whether Ms. Conniff has satisfied her burden of proving each of the three Brunner ele ments. Accordingly, it is ORDERED that this case is REMANDED to the bankruptcy court for further fact-finding and legal determinations consistent with the Eleventh Circuits and this courts opinions, as further set out in order. Signed by Chief Judge William Keith Watkins on 1/5/18. Electronically furnished to bankruptcy court.(djy, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
ECMC,
Appellant,
v.
ALEXANDRA ELIZABETH
ACOSTA-CONNIFF,
Appellee.

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CASE NO. 2:15-CV-220-WKW
[WO]

MEMORANDUM OPINION AND ORDER
This action is before the court on the mandate of the U.S. Court of Appeals
for the Eleventh Circuit. (Doc. # 35.) The Eleventh Circuit vacated this court’s
judgment and remanded this action for further proceedings in accordance with its
instructions. (Doc. # 34.) For the reasons that follow, this action will be remanded
to the bankruptcy court for additional factual findings and legal determinations.
I. BACKGROUND
On review of the bankruptcy court’s determination that Appellee Alexandra
Elizabeth Acosta-Conniff’s (“Ms. Conniff”) student loan debt was dischargeable
under 11 U.S.C. § 523(a)(8), this court reversed the judgment of the bankruptcy
court. It found that Ms. Conniff failed to demonstrate the requisite “additional
circumstances” to satisfy the second prong of the three-part Brunner test, which this
circuit has adopted when considering the dischargeability of student loan debt. See

Brunner v. N.Y. State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2d Cir. 1987);
Hemar Ins. Corp. of Am. v. Cox (In re Cox), 338 F.3d 1238, 1241–42 (11th Cir.
2003). On appeal, the Eleventh Circuit vacated the decision and remanded with
instructions to “apply clear-error review to the bankruptcy court’s factual findings
as to each prong of the Brunner test and de novo review to any of the bankruptcy
court’s legal conclusions.” ECMC v. Acosta-Conniff (In re Acosta-Conniff), 686 F.
App’x 647, 650 (11th Cir. 2017) (emphasis in original). In its opinion, the Eleventh
Circuit noted that it may be necessary for this court to remand this action to the
bankruptcy court for additional findings of fact. Id. at 650 & n.1.
As predicted by the Eleventh Circuit, remand is necessary. When reviewing
a bankruptcy court’s decision, “the district court . . . is [not] authorized to make
independent factual findings.” Equitable Life Assurance Soc’y v. Sublett (In re
Sublett), 895 F.2d 1381, 1384 (11th Cir. 1990). “If the bankruptcy court’s factual
findings are silent or ambiguous as to an outcome determinative factual question,
the district court . . . must remand the case to the bankruptcy court for the necessary
factual determination.” Id. (citing Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th
Cir. 1987)). Here, the facts are insufficiently developed for this court to determine
whether Ms. Conniff has met her burden of proving Brunner’s three requirements,
and there are issues of fact that the bankruptcy court must clarify before it can

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determine—and this court can review—whether Ms. Conniff has satisfied Brunner’s
requirements.
II. DISCUSSION
In its opinion vacating this court’s decision reversing the bankruptcy court’s
discharge order, the Eleventh Circuit set out the elements of the Brunner test that
Ms. Conniff must prove to obtain a discharge of her student debts:
Under the Brunner test, a debtor is entitled to discharge of her student
debts if she proves all of the following:
(1) That the debtor cannot maintain, based on current income and living
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.
In re Acosta-Conniff, 686 F. App’x 647, 648 (11th Cir. 2017) (citing Brunner, 831
F.2d at 396). The Eleventh Circuit reiterated that “[t]he debtor bears the burden of
proving each prong of the Brunner test by a preponderance of the evidence.” Id.
at 649 (citing Educ. Credit Mgmt. Corp. v. Mosley (In re Mosley), 494 F.3d 1320,
1324 (11th Cir. 2007)).
A.

Minimal Standard of Living
The first prong of the Brunner test is whether the debtor can maintain a

“‘minimal’ standard of living for herself and her dependents if forced to repay the
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loans.” Brunner, 831 F.2d at 396. A “minimal standard of living” is not one of
abject poverty, but it does require “more than a showing of tight finances.” Penn.
Higher Educ. Assistance Agency v. Faish (In re Faish), 72 F.3d 298, 306 (3d Cir.
1995). When conducting this analysis, courts compare a debtor’s disposable income,
determined by the difference between monthly income and reasonable and necessary
monthly expenses, with the monthly payment necessary to repay the student loans.
See Douglas v. Educ. Credit Mgmt. Corp. (In re Douglas), 366 B.R. 241, 253–55
(Bankr. M.D. Ga. 2007). A court making this determination “must apply its common
sense knowledge gained from ordinary observations in daily life and general
experience to determine whether [a debtor’s] expenses are reasonable and
necessary.” Id. at 253.
The bankruptcy court calculated Ms. Conniff’s monthly student loan payment
to be $915. (Doc. # 1-3, at 2.) In doing so, the bankruptcy court took judicial notice
of the variables involved, apparently because it found the facts “not subject to
reasonable dispute.” Fed. R. Evid. 201(b). The bankruptcy court explained that it
“fill[ed] the gap in Conniff’s proof” when it made this calculation because Ms.
Conniff, who was not represented by counsel, could not competently submit the
evidence needed to make this calculation. (Doc. # 1-3, at 2 & n.2.)
Meanwhile, Ms. Conniff’s student-loan creditor, Educational Credit
Management Corp. (“ECMC”), argued that a much lower payment—$346 per
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month—was the benchmark. It explained that, if Ms. Conniff participated in an
income contingent repayment plan (“ICRP”), her monthly payment would be $346,
not $915. (Doc. # 1-3, at 12.)
Disposing of ECMC’s argument, the bankruptcy court found that similar
arguments “have been rejected both by the Eleventh Circuit and by this Court.”
(Doc. # 1-3, at 12.) The bankruptcy court string-cited four cases to support its
contention that it need not consider what Ms. Conniff’s payments would be were she
to enroll in an ICRP. (See Doc. # 1-3, at 12 (citing Mosley, 494 F.3d at 1327;
McLaney v. Ky. Higher Educ. Assistance Auth. (In re McLaney), 375 B.R. 666 (M.D.
Ala. 2007); Al-Riyami v. U.S. Dep’t of Educ. (In re Al-Riyami), No. 12-80935, 2014
WL 2800815 (Bankr. M.D. Ala. Jan. 6, 2014), aff’d, No. 3:14-CV-73, 2014 WL
1584481 (M.D. Ala. Apr. 21, 2014); Bumps v. Wells Fargo Educ. Fin. Servs. (In re
Bumps), No. 6:11-BK-06677, 2014 WL 185336 (Bankr. M.D. Fla. Jan. 15, 2014).)
Because this court previously resolved this case on Brunner’s second prong,
it found it unnecessary to consider the first and third prongs. (See Doc. # 21, at 13
& n.7.) Now, on review of the bankruptcy court’s decision, this court finds that the
bankruptcy court committed errors of law and fact in its analysis of whether Ms.
Conniff satisfied Brunner’s first prong. Those errors fall into three categories.
The bankruptcy court’s first error—a legal one, which this court reviews de
novo—was its misapplication of the Eleventh Circuit’s decision in Mosley, and the
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non-binding lower-court decisions in McLaney, Al-Riyami, and Bumps to find that
potential ICRP payments were not relevant to the court’s analysis of the first
Brunner prong. The bankruptcy court failed to recognize that each of these cases is
distinguishable from the instant case. Three of the four cases, including Mosley, did
not address the debtor’s ICRP eligibility at the first Brunner prong. In Mosley, the
Eleventh Circuit considered the ICRP under the good-faith factor of the Brunner
test, rather than the minimal-standard-of-living factor. It noted that “courts have
rejected a per se rule that a debtor cannot show good faith where he or she has not
enrolled in the [ICRP].” Mosley, 494 F.3d at 1327 (citing Educ. Credit Mgmt. Corp.
v. Frushour (In re Frushour), 433 F.3d 393, 402–03 (4th Cir. 2005)). Determining
that Mosley had met the good-faith standard, despite his not applying for an ICRP,
the Eleventh Circuit noted that his “dire living conditions and persistent inability to
obtain steady work” were such that the ICRP would not have provided “a realistic
solution to his inability to pay.” Id. This court, in McLaney, made a similar
determination, noting that “declining to participate in a refinancing program when
disposable income is insufficient to cover even the reduced payments is not
indicative of bad faith.” 375 B.R. at 678. The facts of Al-Riyami are similar. See
Al-Riyami, 2014 WL 2800815, at *4 (determining at Brunner’s third prong that
requiring the debtor to enroll into an ICRP would be a “fruitless exercise” and that
the debtor’s failure to participate in such a program did not preclude a finding of
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good faith). Hence, these decisions do not support the bankruptcy court’s legal
conclusion that the first Brunner element does not permit consideration of a reduced
payment plan under an ICRP.
There is an additional distinction shared by these cases that the bankruptcy
court overlooked. The courts, including the Eleventh Circuit, considered the lower
ICRP payments but then concluded that the lower payments still were so high as to
pose an undue hardship on the debtor. See Mosley, 494 F.3d at 1327; McLaney, 375
B.R. at 678; Al-Riyami, 2014 WL 2800815, at *4. See also Bumps, 2014 WL
185336, at *3 (noting that the debtor did not have enough disposable income to
afford the reduced ICRP payment). Therefore, under the factual situations presented
in those cases, the ICRP did not provide realistic solutions so that the debtors could
have repaid their loans. Here, on the other hand, there is a factual finding that Ms.
Conniff could eliminate her voluntary retirement contribution and possibly “squeeze
a couple of hundred more out of her budget.” (Doc. # 1-3, at 11.) Ms. Conniff’s
voluntary retirement contribution is $220. If Ms. Conniff can “squeeze a couple of
hundred more out of her budget,” it may be that she could reasonably make a
monthly ICRP payment of $346. Accordingly, the bankruptcy court’s reliance on
these cases constitutes legal error because the court misapplied the law to the facts
at issue. Acosta-Conniff, 686 F. App’x at 649 (noting that “a bankruptcy court’s

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interpretation of any legal question pertinent to its fact finding” is subject to de novo
review).
The bankruptcy court’s second error pertains also to Brunner’s first
requirement and is closely related to its first error: The bankruptcy court failed to
determine whether Ms. Conniff was eligible for an ICRP and, consequently, did not
consider whether participation in an ICRP would affect Ms. Conniff’s ability to
maintain a minimal standard of living while making payments on her debt. As will
be explained, this error is both legal and factual.
The bankruptcy court committed legal error by improperly applying Brunner
and not deciding whether Ms. Conniff could make a reduced ICRP payment. There
is a split of authority as to how—and whether—courts should consider ICRP
payments when deciding this first Brunner prong. Notwithstanding the approach
taken by one bankruptcy court in this circuit, this court finds that ICRP eligibility
and monthly ICRP payments should be considered under the first Brunner prong.
In Johnson v. Education Credit Management Corporation (In re Johnson),
299 B.R. 676 (Bankr. M.D. Ga. 2003),1 the bankruptcy court considered the
dischargeability of husband-and-wife debtors’ student loan debt. There, “[b]ased on
the undisputed evidence, the Johnsons qualif[ied] for the ICRP.” Id. at 683. Even

1

Johnson was decided less than one week before the Eleventh Circuit formally adopted
Brunner in Cox. See Cox, 338 F.3d at 1241–42. The Johnson court specifically noted that it did
“not consider these Brunner elements to be either exhaustive or conclusive.” 299 B.R. at 680.
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though the ICRP payments may have been as low as $0 per month, the bankruptcy
court nevertheless refused to consider the ICRP payments, instead choosing only to
“consider whether the repayment of those loans in full under the debtor’s current and
foreseeable future circumstances would create an undue hardship without reference
to the ICRP.” Id. The court reasoned that considering the availability of ICRP
payments “forces a debtor who has no ability to pay his student loans in full to defer
discharge for 25 years” in place of having the loans discharged immediately. Id.
Such a result, according to the court, could not be squared with the existence of the
availability of discharge under § 523(a)(8) and the “‘fresh start policy of the
Bankruptcy Code.’” Id. (quoting Waterson v. Penn. Higher Educ. Assistance
Agency (In re Waterston), No. 01-1060, 2002 WL 31856714, at *8 (Bankr. E.D. Pa.
Nov. 26, 2002). See also Crawley v. Educ. Credit Mgmt. Corp. (In re Crawley), 460
B.R. 421, 438 (Bankr. E.D. Pa. 2011) (“To hold otherwise would make eligibility in
the ICRP outcome determinative in undue hardship determinations under § 523(a)(8)
and would result in the delegation to an administrative agency, the Department of
Education, the authority to determine the dischargeability of certain student loans.”).
This approach, however, is not the rule of this circuit, and other bankruptcy
courts have not followed Johnson’s lead. See, e.g., Sturtevant v. Educ. Credit Mgmt.
Corp. (In re Sturtevant), No. 6:09-BK-08565, 2011 WL 1656111 at *3 (Bankr. S.D.
Fla. Apr. 26, 2011) (considering availability of federal loan consolidation program
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under Brunner’s first prong). And more importantly, such an approach is at odds
with a commonsense application of Brunner and ignores the high bar that a debtor
must reach in order to satisfy Brunner’s requirements.

Simply put, neither

§ 523(a)(8) nor Brunner precludes the bankruptcy court from considering ICRP
payments; indeed, if such payments affect a debtor’s ability to maintain a minimal
standard of living—a necessary element for discharge under Brunner—it follows
that the bankruptcy court must consider such programs. Moreover, this court does
not find persuasive Johnson’s reference to congressional intent and the relationship
between federal ICRPs and § 523(a)(8). A rule that prohibited bankruptcy courts
from considering ICRPs under Brunner’s first prong
would yield an absurd result: almost every debtor would satisfy Prong
1 easily if courts were restricted to considering only the amount of their
[original] contract payment. Congress’s creation of the flexible incomebased repayment options reflects an intent that debtors not be
automatically or easily excused from their student loan obligations.
Educ. Credit Mgmt. Corp. v. Beattie, 490 B.R. 581, 588 (W.D. Wash. 2012).
Especially when considered in light of the principle that “Congress intended to make
it difficult for debtors to obtain a discharge of their student loan indebtedness,” Cox,
338 F.3d at 1243, consideration of ICRP eligibility and payment amounts is
appropriate and required under Brunner’s first prong.
Apart from these considerations, the Eleventh Circuit has suggested, in an
unpublished opinion, that consideration of ICRP payments is appropriate when
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applying Brunner’s first prong. See Wieckiewicz v. Educ. Credit Mgmt. Corp., 443
F. App’x 449, 451 (11th Cir. 2011) (per curiam).

In Wieckiewicz, the Eleventh

Circuit considered the district court’s dismissal of a bankruptcy appeal. The appeal
was dismissed because the debtor failed to comply with a bankruptcy court order to
apply for a federal loan consolidation program. Id. at 450. Affirming the dismissal,
the Eleventh Circuit held that the debtor’s
eligibility under the [federal loan consolidation program] would play a
substantial role in whether he would be able to show undue hardship
under Brunner. If he qualified for the [program,] Wieckiewicz’s loan
payments could have been reduced to $0 per month, and eventually the
loans would be forgiven. On the other hand, if Wieckiewicz did not
qualify, the bankruptcy judge indicated a strong likelihood that
Wieckiewicz’s loan payments were high enough that he would be able
to establish undue hardship under Brunner because he would not be
able to maintain a minimal standard of living.
Id. at 451. Though the Eleventh Circuit did not explicitly sanction the consideration
of ICRPs under Brunner’s first prong, Wieckiewicz’s treatment of the issue suggests
that this approach is proper, and this court finds that consideration of ICRP eligibility
and payments is appropriate here. The bankruptcy court’s failure to determine Ms.
Conniff’s eligibility for the ICRP was legal error. This legal error left the record
bereft of essential factual findings.
More specifically, the bankruptcy court’s failure to develop the record and
consider the relevant “outcome determinative” facts, see Sublett, 895 F.2d at 1384,
constitutes clear error that requires a remand for further findings of fact. As
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explained above, whether Ms. Conniff was eligible to participate in an ICRP may be
outcome determinative under the first Brunner prong; if she could afford an ICRP
payment while maintaining a minimal standard of living, Brunner’s first requirement
is not satisfied. Accordingly, on remand, the bankruptcy court must find whether
Ms. Conniff is eligible to participate in such a program and, if she is, what the
monthly payment would be.
Finally, the bankruptcy court’s third error is that its calculation of Ms.
Conniff’s monthly expenses is clearly erroneous. There is no indication in the record
that, when determining that Ms. Conniff could not maintain a minimal standard of
living if forced to repay the loans, the bankruptcy court performed an itemized
analysis of Ms. Conniff’s budget to determine which expenses were reasonable and
which were not. (See Doc. # 21, at 7 (“The bankruptcy court did not indicate whether
it had determined that all of the Schedule J expenses were reasonable and necessary
for the support of Conniff and her two dependent sons. The record is mostly silent
as to this fact-bound undertaking.”).) Because this court cannot make those findings
of fact and those findings are needed to decide Brunner’s first prong, the bankruptcy
court must develop the record and make findings as to the reasonableness of Ms.
Conniff’s monthly expenses.
Ultimately, consistent with the foregoing, the bankruptcy court must make
specific findings of fact and conclusions of law as to whether Ms. Conniff has met
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her burden of showing that she cannot maintain a “‘minimal’ standard of living for
herself and her dependents if forced to repay the loans.” Brunner, 831 F.2d at 396.
B.

Additional Circumstances
The second prong of the Brunner test requires that additional circumstances

exist such that the debtor’s “‘state of affairs is likely to persist for a significant
portion of the repayment period of the student loans.’” Cox, 338 F.3d at 1241
(quoting Brunner, 831 F.2d at 396). Vacating the decision that Ms. Conniff did not
satisfy this requirement, the Eleventh Circuit held that this court “did not . . . indicate
whether it was applying a clear error or a de novo standard of review when it
considered the bankruptcy court’s finding as to the second prong of the Brunner test”
and that it could not “confidently conclude that the court was applying a clear error
standard.” Acosta-Conniff, 686 F. App’x at 650–51. This court recognizes that it
considered portions of the record not cited by the bankruptcy court, reasoning that
the bankruptcy court found the debtor’s testimony to be “forthright and credible.”
(See Doc. # 21, at 3.) Drawing conclusions from Ms. Conniff’s testimony, this court
made findings of fact where the bankruptcy court had not. Because this court cannot
do so, the bankruptcy court must make findings of fact to support its conclusion with
respect to Brunner’s second prong.
In its opinion, the bankruptcy court cited almost no evidence to support its
conclusion that Ms. Conniff bore her burden of demonstrating the requisite
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additional circumstances. (See Doc. # 1-3, at 13 (“This was established by the
evidence offered at trial.”).) The apparent lack of evidence constitutes “silence . . .
as to an outcome determinative factual question” that this court cannot cure. Sublett,
895 F.2d at 1384. Therefore, on remand, the bankruptcy court should make findings
including, but not limited to, Ms. Conniff’s current and future childcare expenses;
Ms. Conniff’s current and future child support benefits; Ms. Conniff’s ability to
apply for higher paying jobs; the existence of annual pay raises; Ms. Conniff’s
decision to stay in the same geographical area; and Ms. Conniff’s ability to pursue
additional work alongside her current employment as a teacher.
Regardless of which facts the bankruptcy court finds on remand, it must recite
the facts that support its legal conclusion—which “additional circumstances,” if any,
indicate that Ms. Conniff’s “state of affairs is likely to persist for a significant portion
of the repayment period of the student loans.” Brunner, 831 F.2d at 396. Ms.
Conniff bears the burden of establishing each of Brunner’s three prongs, a burden
that her initial pro se status2 did not affect. Once those facts are developed, this court
will be able to review—applying a clear error standard—the bankruptcy court’s

2

Ms. Conniff appeared pro se in the bankruptcy court and here. She had counsel on appeal,
according to the Federal Reporter and this court’s electronic record (see, e.g., Doc. # 33). After
the entry of the Eleventh Circuit’s mandate, counsel also appeared on Ms. Conniff’s behalf in this
court. (See Docs. # 36–39.) Counselled or not, Ms. Conniff bears the burden of proving all three
Brunner prongs.
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findings of fact and consider whether Ms. Conniff has satisfied her burden to
establish the “additional circumstances” that Brunner’s second prong requires.
C.

Good Faith
The third and final prong of the Brunner test requires the debtor to have made

good-faith efforts to repay the loans. Cox, 338 F.3d at 1241. A debtor’s “failure to
make a payment, standing alone, does not establish a lack of good faith.” Mosley,
494 F.3d at 1327 (quoting Educ. Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302, 1311
(10th Cir. 2004) (internal quotation marks omitted)). “Good faith is measured by
the debtor’s efforts to obtain employment, maximize income, and minimize
expenses; [her] default should result, not from [her] choices, but from factors beyond
[her] reasonable control.” Id. “A lack of bad faith is not the applicable test,” and
“[a]ctual payments are not required to prove good faith.” Douglas, 366 B.R. at 259.
Moreover, while failure to apply for an ICRP is not per se a lack of good faith,
efforts to negotiate a repayment plan are a demonstration of intent to repay the loans
in good faith. Mosley, 494 F.3d at 1327; see also Wieckiewicz, 443 F. App’x at 451–
52.

Enrollment in loan consolidation and repayment plans is “an important

component of the good-faith inquiry” because “it illustrates that the debtor takes her
loan obligations seriously, and is doing her utmost to repay them despite her
unfortunate circumstances.” Frushour, 433 F.3d at 402. Ms. Conniff must meet her
burden to establish the third prong of the Brunner test.
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The bankruptcy court based the good-faith decision on the actual payments
made, Ms. Conniff’s communication with the creditor in obtaining deferrals, and her
applications for loan forgiveness based on teaching in a rural area. (Doc. # 1-3,
at 13.) Ms. Conniff negotiated a deferral status for her loans for several years, paid
over $9,000 toward her loans, and applied three times to a program that would
forgive $17,500 of the loans for every five years she spends teaching in a rural area.
(Doc. # 1-3, at 3–4.) These were relevant considerations. However, the bankruptcy
court clearly erred by not also factoring into its analysis Ms. Conniff’s efforts, if any,
to minimize her expenses, to maximize her income, and to apply for an ICRP. In
light of the opinions of the Eleventh Circuit and this court, on remand the bankruptcy
court should reexamine its factual findings and conclusions of law on Brunner’s
third prong.
III. CONCLUSION
For the foregoing reasons, the bankruptcy court must make additional findings
of fact and conclusions of law as to whether Ms. Conniff has satisfied her burden of
proving each of the three Brunner elements. Accordingly, it is ORDERED that this
case is REMANDED to the bankruptcy court for further fact-finding and legal
determinations consistent with the Eleventh Circuit’s and this court’s opinions.
DONE this 5th day of January, 2018.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE
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