United States Dep't of Educ. v. Gerhardt (In re Gerhardt)

348 F.3d 89 (5th Cir. 2003)



To justify discharging the debtor's student loans, the Brunner test developed by the United States Court of Appeals for the Second Circuit requires a three-part showing: (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 the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. Because the Second Circuit presented a workable approach to evaluating the "undue hardship" determination, the United States Court of Appeals for the Fifth Circuit expressly adopts the Brunner test for purposes of evaluating an 11 U.S.C.S. § 523(a)(8) decision.


Over a period of years, Jonathon Gerhardt obtained over $77,000 in government-insured student loans to finance his education at the University of Southern California, the Eastman School of Music, the University of Rochester, and the New England Conservatory of Music. Gerhardt is a professional cellist. He subsequently defaulted on each loan owed to the United States Government. In 1999, Gerhardt filed for Chapter 7 bankruptcy and thereafter filed an adversary proceeding seeking discharge of his student loans pursuant to 11 U.S.C. § 523(a)(8). The bankruptcy court discharged Gerhardt's student loans as causing undue hardship. On appeal, the district court reversed, holding that it would not be an undue hardship for Gerhardt to repay his student loans. 


Did the debtor establish persistent undue hardship entitling him to discharge his student loans?




The court held that the debtor had not established persistent undue hardship entitling him to discharge his student loans. The debtor held a masters degree in music from the New England Conservatory of Music. He was about 43 years old, healthy, well-educated, and had no dependents, yet had repaid only $755 of his over $77,000 debt. The debtor was capable of obtaining additional steady employment in a number of different arenas. Furthermore, nothing in the Bankruptcy Code suggested that the debtor could choose to work only in the field in which he was trained, obtain a low-paying job, and then claim that it would be an undue hardship to repay his student loans.

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