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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA
| In re: Case No. A89-01065 | ) | |
| ) | ||
| BARBARA JEAN POSEY, | ) | |
| a/k/a Barbara Jean Gray, | ) | |
| ) | ||
| Debtor. | ) | |
| __________________________________________ | ) | |
| BARBARA JEAN POSEY, | ) | Adversary No. A89-01065-001 |
| a/k/a Barbara Jean Gray, | ) | Chapter 7 |
| ) | ||
| Plaintiff, | ) | |
| ) | ||
| v. | ) | |
| ) | ||
| STATE OF ALASKA, STUDENT | ) | |
| LOAN PROGRAM, | ) | |
| ) | ||
| Defendant. | ) | |
| __________________________________________ | ) |
This case came before the court for trial on August 20, 1990. The sole witness was the Plaintiff, who appeared telephonically. The issue before the court is whether or not her student loan may be discharged on undue hardship grounds pursuant to 11 U.S.C. § 523(a)(8)(B).
This court looks to the totality of the circumstances surrounding an application
for dischargeability on undue hardship grounds. In re Birden, 17 B.R. 891 (Bankr.
Pa. 1982). The Plaintiff in this case is a high school educated 34 year old
divorcee who is supporting two children as a secretary. She took out a
$6,000.00 student loan in 1984 to attend computer programming
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vocational school. She later divorced and started working for the federal government at
Fort Richardson as a secretary. She worked for four years for the government.
She earned $8.30 an hour Plus a 25% cost of living allowance as a G.S. 5. On
October 13, 1989 she filed a chapter 7 bankruptcy. In that bankruptcy she showed
net monthly income of $1,560.00 versus monthly expenses of $2,100.00.
The Plaintiff and her children moved to Michigan in the spring of 1990. She quit her job at Fort Richardson. She now works as a secretary in Michigan. Her monthly income is but $600.00 for working 30 hours a week, part-time. She had been receiving unemployment checks of $221.00 a week prior to her recent employment. She will receive $150.00 a week in unemployment through December of 1990 because she is only working part-time. She hopes to get a job with the State of Michigan for $11.00 an hour. With unemployment pay, she will have a surplus of income over expenses of approximately $400.00 a month for the next three to four months. She will then face a deficit of about $200.00 a month unless she improves her job position. Should she get the State of Michigan job, her financial position should improve to a surplus. She needs a car.
The Plaintiff left Alaska because of the imminent release of her 19 year old
step-son from McLaughlin Correctional Facility.
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He was incarcerated because of
the sexual abuse of her son and daughter. She is concerned about her children,
a boy 14 and a girl 9.
Ms. Posey has no appreciable assets other than her clothing. She receives no child support, although she has attempted to obtain the assistance of the appropriate governmental agencies to enforce support against her ex-husband. $3,000.00 of the $6,000.00 in loan principal was taken by her ex-husband when the parties divorced. She has never made a payment on the loan.
Against these circumstances, I conclude that failure to discharge the bulk of the loan will constitute an undue hardship on the Debtor and her dependents. Requiring the Debtor to pay this loan in full will prevent her from paying for food, clothing and shelter necessary for a minimal level of support for herself and her children. However, due to the Debtor's employment prospects and also due to the fact that no payments were made on the loan at any time from its inception, $1,500.00 of the loan principal shall be nondischargeable. All other principal and accrued interest shall be discharged as of the date of this order. The balance of $1,500.00 shall bear interest at the contract rate and be paid at the rate of $50.00 per month, beginning October 1, 1990 and continuing until paid in full.
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Although this type of restructuring is somewhat unusual, other courts have
allowed restructuring of educational loan obligations. In re Littell,
6 B.R. 85 (Bankr. Ore. 1980); In re Archie, 7 B.R. 715 (Bankr. E.D. Va. 1980);
Matter of Hemmen, 7 B.R. 63 (Bankr. N.D. Ala. 1980). The unique circumstances
of this case justify such a result.
IT IS ORDERED that the debt due the State of Alaska, Student Loan Program by Barbara Jean Posey a/k/a Barbara Jean Gray is discharged except for the sum of $1,500.00 which shall be payable in monthly installments of $50.00 beginning October 1, 1990 at the contract rate of interest until paid in full from the date of this order forward.
| Serve: | D. Stoker |
| M. Lindeman | |
| U.S. Trustee |