United States of America v. Al-Riyami
MEMORANDUM OPINION. Signed by Chief Judge William Keith Watkins on 4/21/2014. (wcl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
UNITED STATES OF
AMERICA, U.S. DEPARTMENT
CASE NO. 3:14-CV-73-WKW
Appellant United States of America, U.S. Department of Education, appeals
the United States Bankruptcy Court for the Middle District of Alabama’s Order
discharging Appellee Valerie Amoroso Al-Riyami’s student loan debt under 11
U.S.C. § 523(a)(8)(B). For the reasons to follow, the Order of the Bankruptcy
Court is due to be affirmed.
I. JURISDICTION AND VENUE
This court has jurisdiction to review the Order of the Bankruptcy Court
under 28 U.S.C. § 158(a)(1). Venue is proper because an appeal “shall be taken
only to the district court for the judicial district in which the bankruptcy judge is
serving.” Id. § 158(a).
II. STANDARD OF REVIEW
The bankruptcy court’s findings of fact are reviewed for clear error and its
legal conclusions de novo. Educ. Credit Mgmt. v. Mosley (In re Mosley), 494 F.3d
1320, 1324 (11th Cir. 2007). A finding of fact “is clearly erroneous when although
there is evidence to support it, the reviewing court on the entire evidence is left
with the definite and firm conviction that a mistake has been committed.”
Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985) (citation,
internal quotation marks, and alterations omitted).
Appellant argues that the Bankruptcy Court committed reversible error in its
bench-trial ruling that Appellee satisfied elements one and two of the threepronged test for determining what constitutes undue hardship under § 523(a)(8)(B).
See Hemar Ins. Corp. of Am. v. Cox (In re Cox), 338 F.3d 1238, 1241 (11th Cir.
2003) (per curiam) (adopting the test in Brunner v. New York State Higher
Education Services Corp., 831 F.2d 395, 396 (2d Cir. 1987), for determining
undue hardship).1 Those two elements require a debtor to show (1) that she
“cannot maintain, based on current income and expenses, a ‘minimal’ standard of
A debtor must satisfy all three elements to obtain a discharge of a student loan.
Brunner, 831 F.2d at 396. Appellant does not challenge the Bankruptcy Court’s finding under
the third element that Appellee “made a good faith effort to repay her student loans.” (Bankr. Ct.
Order, at 6.)
living for herself and her dependents if forced to repay the loans” and that
(2) “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.”
Brunner, 831 F.2d at 396; see also In re Cox, 338 F.3d at 1242 (describing the
second element as “an inability to pay that is likely to continue for a significant
First Brunner Element
Appellant raises three claims of error with respect to the Bankruptcy Court’s
ruling as to the first Brunner element.
First, Appellant contends that the
Bankruptcy Court’s factual finding that Appellee has no disposable income
because her reasonable monthly expenses exceed her income by more than $500 is
“flawed [because] it fails to account for the undisclosed amounts of monetary
assistance Appellee receives from her husband and other family members.”
(Appellant’s Br., at 7 (Doc. # 5).) But the Bankruptcy Court did consider thirdparty sources of payment. During the adversary proceedings, Appellee disclosed
that her parents paid for her car, car insurance, and telephone service. Based upon
that evidence, the Bankruptcy Court excluded these items from Appellee’s
It also excluded expenses for haircuts, which the record reveals
Appellee’s uncle provided for the children without charge. (Bankr. Ct. Order, at 3
n.1 (Doc. # 2-30) (noting that Appellee’s “expense itemization does not include
costs for a vehicle and insurance, telephone, [and] haircuts . . .”).) As a result, the
third-party payments and services were not deducted from Appellee’s income.
Appellant does not contend that if these expenses had been incurred by Appellee,
they would have been unreasonable.2
The Bankruptcy Court also took into account that Appellee’s monthly
“deficit is currently made up” not only by assistance from Appellee’s parents, but
also by “money she occasionally receives from her estranged husband.” (Bankr.
Ct. Order, at 3.) Appellee’s trial testimony – that on prior occasions if she asked
her estranged husband, he “might” pay either the electric or water bill (Trial Tr.
24) – does not leave the court with a firm conviction that the Bankruptcy Court
made a mistake in finding that Appellee only occasionally receives financial
support from her estranged husband. (See Bankr. Ct. Order, at 3.) Moreover,
contrary to Appellant’s assertion, the Bankruptcy Court expressly took into
account that Appellee’s estranged husband contributed at least a minimal amount
It is notable also that the Bankruptcy Court could have deducted, but did not deduct, any
expenses for unanticipated emergencies. (Bankr. Ct. Order, at 3 n.1); see also In re McLaney,
375 B.R. at 675 (observing that under the first Brunner element, it is appropriate to include
“those other unanticipated expenses which seem, for every family, to inevitably pop-up each
month but defy neat categorization” (citation and internal quotation marks omitted)).
to Appellee’s monthly deficit. There is no clear error in the Bankruptcy Court’s
Second, Appellant asserts that the Bankruptcy Court clearly erred because it
did not include a tax refund in computing Appellee’s income. Although Appellee
testified that in the past she had received tax refunds (Trial Tr. 27),3 there is no
testimony or other evidence that in August 2013 (when the trial took place), she
knew whether she would receive a tax refund for the 2013 calendar year. The
Bankruptcy Court’s failure to account for a tax refund in calculating Appellee’s
income is not clear error.
Third, Appellant contends that an “undue hardship” discharge is not
appropriate because under an income-based repayment program offered by
Appellant, a repayment plan would “allow for an adjusted payment amount” as low
as $0.00 per month. (Appellant’s Br., at 9; see also Bankr. Ct. Order, at 3.) This
argument has not been successful in other courts, however. See Durrani v. Educ.
Credit Mgmt. Corp., (In re Durrani), 311 B.R. 496, 506 (Bankr. N.D. Ill. 2004)
(“There are numerous published cases where a debtor’s monthly payment under
the ICRP would be $0.00 – obviously an amount that any debtor can pay while
maintaining a minimal standard of living – yet the court found the existence of
She was not asked the amounts of those refunds.
undue hardship and determined that the student loan was dischargeable.”
(collecting cases)), aff’d, Educ. Credit Mgmt. Corp. v. Durrani, 320 B.R. 357
(N.D. Ill. 2005); see also Thomsen v. Dep’t of Educ. (In re Thomsen), 234 B.R.
506, 512 (Bankr. D. Mont. 1999) (even though the debtors’ monthly payment
would be zero under an income-based repayment program, the first Brunner
element “requires simply that the Debtors show they cannot repay the loans and
maintain a minimal standard of living”). Here, the Bankruptcy Court’s factual
findings, which are not clearly erroneous, support the legal conclusion that
Appellee “cannot maintain, based on current income and expenses, a ‘minimal’
standard of living for herself and her dependents if forced to repay the loans.”
Brunner, 831 F.2d at 396. Appellee’s repayment of her loan simply is not possible
in any amount based upon her current income and expenses.4
In sum, the Bankruptcy Court did not commit reversible error in finding that
Appellee satisfied the first Brunner element.
Second Brunner Element
With respect to the second Brunner element, Appellant contends that the
Bankruptcy Court erred in finding that Appellee’s “current circumstances are
likely to persist into the foreseeable future.”
(Bankr. Ct. Order, at 6.)
The Bankruptcy Court also did not commit clear error in finding that Appellee provided
a “bare-boned” expense itemization that “omit[ted] expenses that almost certainly will arise.”
(Bankr. Ct. Order, at 5.)
Appellant correctly points out, Appellee has a college degree, a full-time job,
mental and physical health, healthy children, and employable years ahead of her.
However, while these factors are relevant to whether the debtor’s dire financial
situation will persist for a significant period of time, they are not the only factors.
Other relevant factors, which the Bankruptcy Court considered, include the age of
the debtor’s children and the debtor’s income history. See McLaney v. Ky. Higher
Educ. Assistance Auth. (In re McLaney), 375 B.R. 666, 675 (M.D. Ala. 2007).
The Bankruptcy Court found that Appellee, a single mother, would be
unable to work in her former higher-paying career because it requires overseas
deployment that would take her away from the care of her two young children
(four- and eight-years old). It also found that Appellee lacked a marketable degree
that would enable her to earn more money than she does in her current job, as
demonstrated by Appellee’s diligent job searches. The Bankruptcy Court found
that these circumstances established that for the foreseeable future Appellee likely
would not be able to generate any disposable income to pay back her loan. The
Bankruptcy Court’s factual findings are not clearly erroneous, and those facts
support its legal conclusion that Appellee satisfied the second Brunner element.5
The Bankruptcy Court framed the issue under Brunner’s second element as whether
Appellee’s situation was likely to persist “for the foreseeable future.” (Bankr. Ct. Order, at 5.)
Neither Brunner nor In re Cox, which adopted the Brunner test for this circuit, employs the
phrase “foreseeable future.” While the semantical difference in the language used by the
Based upon the foregoing, the Order of the Bankruptcy Court is AFFIRMED
for substantially the same reasons set out in the Bankruptcy Court’s well-reasoned
A separate judgment will be entered.
DONE this 21st day of April, 2014.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE
Bankruptcy Court is noted, there is no indication that the Bankruptcy Court was applying a
standard distinct from Brunner, and Appellant has not argued otherwise. (See Bankr. Ct. Order,
at 4 (quoting the Brunner test as articulated in In re Cox)); cf. Nash v. Conn. Student Loan
Found. (In re Nash), 446 F.3d 188, 190–91 (1st Cir. 2006) (observing that the Brunner test
“require[s] the debtor to demonstrate that her disability will prevent her from working for the
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