Brunner Test Reexamined in Western District of New York

By: Shane Malone

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Despite failing to apply for an income-based loan repayment plan, the Bankruptcy Court for the Western District of New York (the “Court”) held in In re Bene[1], that Donne Bene (the “Debtor”) satisfied the “undue hardship”[2] test and discharged her student loans.  The Debtor was an elderly Chapter 7 debtor who owed $57,298.70 to Educational Credit Management Corp., a student loan lender (the “Lender”), for loans she took out between 1981 and 1987. The Debtor voluntarily withdrew from school in 1987 before earning a degree or any professional license in order to care for her incapacitated parents.[3]  Although she had recently received a termination notice from her employer,[4] at the time of her discharge, she worked—as she had for the last 12 years—on an assembly line earning $10.67 per hour.[5] Her impending job loss and minimal level of education left her with little hope of improving her financial situation.[6]  The Debtor had no other debts, and had made good faith efforts to repay her student loans, but those payments only totaled $2,400.[7]  The Lender argued that the Debtor should be ineligible for a discharge of her student loan debt because she had not enrolled in income-based repayment plans for which she was eligible, such as the William D. Ford Program (the “Program”).[8]

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