Thomas v. Department of Education (In re Thomas), 18-11091 (5th Cir. July 30, 2019)

The U.S. Court of Appeals for the Fifth Circuit recently ruled that a debtor could not discharge her student educational loans, despite her decline in health and a highly sympathetic situation. 

This particular debtor, Ms. Thomas, suffered degenerative nerve disease that caused pain and numbness in her legs and feet after standing for extended periods.  She also suffered from diabetes.  As a result of her financial and medical conditions, she filed bankruptcy and among other debts, sought to discharge student loans totaling $7,800.

The evidence showed that she often took unpaid medical leave to deal with her medical issues and incurred significant medical expenses while maintaining a job as a customer service representative.  Unfortunately, after her employer was acquired by another company, the new owner terminated her for violating company policy (allegedly she listened to music on her headphones during lunch breaks).  She then was unable to maintain jobs at Whataburger, a fragrance shop called Perfumania and the United Parcel Service, Inc. because the work required her to stay on her feet.  Moreover, she did not qualify for Medicare or Medicaid, could not afford health insurance, and relied on a charitable program with Parkland Hospital in Dallas for basic medical care and diabetes medication.

Applying the Brunner Test
The Fifth Circuit adopted what is referred to as the Brunner test after the Second Circuit opinion in Brunner v. New York State Higher Education Service Corp., 831 F.2d 395 (2d Cir. 1987)   Following Bruner, the Fifth Circuit ruled that to discharge student loans, the debtor must prove that

(1) she cannot maintain a “minimal standard of living” if forced to repay the loan,
(2) additional circumstances show that the state of affairs is likely to persist for a significant portion of the repayment period, and
(3) the debtor has made a good faith effort to repay the loans.

In analyzing these elements, the Fifth Circuit found that the debtor failed the second part of the Brunner test because she admitted that she was “capable of employment in sedentary work environments.” Thus, the court ruled that there was no evidence that “present circumstances, difficult though might be, were likely to persist throughout a significant portion of the loans’ repayment period.” 

Except for the Eighth Circuit, most circuit courts use the Bruner test.  The Eighth Circuit, which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota, considers the “totality of the circumstances” and is viewed as more favorable to student borrowers.

This Fifth Circuit decision reinforces prior lower courts that have ruled similarly.  If there so much as an ounce of evidence showing that a debtor may be able to pay back his or her student loans during the life of the student loan, the debtor cannot discharge the student loan no matter how sympathetic the circumstances may be. This is notwithstanding the fact that other debts may be discharged without any such consideration including whether a debtor may have the ability to pay his or her debts in the future.

By Published On: August 19, 2019Categories: BankruptcyTags:


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William L. (Bill) Siegel is a Shareholder and Section Head of the Cowles and Thompson Bankruptcy and Creditors’ Rights Practice Group as well as a member of the Corporate and Business Practice Group. His experience includes representing individuals and business entities in their corporate and transactional affairs, including drafting and negotiating agreements of all types, and representing individuals and business entities in disputes that may arise in litigation in State and Federal Courts. He also represents debtors, creditors, Trustees, and Committees in bankruptcy matters in Chapter 7 liquidations and Chapter 11 reorganizations. His clients include small and medium-sized businesses, start-up technology companies, and partnerships. He frequently publishes articles and content regarding trends in bankruptcy law, the economy, commercial real estate, and retail-related matters.