TO: BRUCE LAMB
FROM: KRIS STRICKLAND
SUBJECT: FINAL MEMO
I. QUESTION PRESENTED
Mr. and Mrs. Adams were the co-signers on their son’s student loan. Two years after graduating from college their son died in an automobile accident. Two months later Mr. Adams lost his job. After struggling for awhile, Mr. and Mrs. Adams were unable to keep up with their bills. They decided to file for bankruptcy and were trying to figure out if the student loans, they were still responsible for, could be included on the bankruptcy.
II. SHORT ANSWER
The Adams’ would have to be able to show that this debt imposes undue hardship, in order to have the student loan discharged ...view middle of the document...
The issue before us, whether a non-student co-obligor of a guaranteed educational loan may be discharged from that debt in bankruptcy without proving one of the statutory exceptions, is one of first impression in the courts of appeals. Over the last ten years, the bankruptcy courts have divided on this issue.
Compare In re Dull, 144 B.R. 370 (Bankr.N.D.Ohio 1992); In re Hawkins, 139 B.R. 651 (Bankr.N.D.Ohio 1991); In re Martin, 119 B.R. 259 (Bankr.E.D.Okla.1990); In re Hudak, 113 B.R. 923 (Bankr.W.D.Pa.1990); In re Taylor, 95 B.R. 550 (Bankr.E.D.Tenn.1989); In re Hammarstrom, 95 B.R. 160 (Bankr.N.D.Cal.1989); In re Barth, 86 B.R. 146 (Bankr.W.D.Wis.1988); In re Feenstra, 51 B.R. 107 (Bankr.W.D.N.Y.1985) (all holding such debt nondischargeable) with In re Kirkish, 144 B.R. 367 (Bankr.W.D.Mich.1992); In re Behr, 80 B.R. 124 (Bankr.N.D.Iowa 1987); In re Meier, 85 B.R. 805 (Bankr.W.D.Wis.1986); In re Zobel, 80 B.R. 950 (Bankr.N.D.Iowa 1986); In re Bawden, 55 B.R. 459 (Bankr.M.D.Ala.1985); In re Washington, 41 B.R. 211 (Bankr.E.D.Va.1984); In re Boylen, 29 B.R. 924 (Bankr.N.D.Ohio 1983) (all holding such debt dischargeable).
Although the Bankruptcy Code does not define “undue hardship,” the Sixth Circuit has adopted the test set forth in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395, 396 (2d Cir.1987) for determining the existence of “ undue hardship.”
Under the Brunner test, the debtor must prove each of the following three elements:
(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for [himself] and [his] 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...