June 21, 2021 – McCoy v. United States, No. 20-886, cert. denied, 2021 WL 2519103 (US 21 Jun 2021).

On June 21, the High Court dismissed Thelma McCoy’s application for certiorari seeking a review of a ruling by the U.S. 5th Court of Appeals that she had failed the test under Brunner v . New York Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987), for paying off his student loan debt as “undue hardship”.

McCoy argued that appellate courts, when faced with the definition of undue hardship, are “deeply divided” between the rigid Brunner test used in most circuits and the “holistic and fair approach” of the court. set of circumstances test applied by the 8th United States Court of Appeals and in other circuits.

The two approaches “diverge sharply in both application and results”, and the intervention of the Supreme Court “is necessary to standardize this important and recurring issue,” she said in her petition, filed in January. .

Further, she argued that her case presented “an ideal vehicle” for resolving the circuit dispute, because if her case had been filed in a jurisdiction other than Brunner, that tribunal would have exercised its discretion to consider “all the facts. relevant to undue hardship. “

McCoy had entered college in his 40s, first earning a bachelor’s degree, followed by a master’s degree in 2006 and a doctorate. in 2014, borrowing $ 175,000 to finance his studies, according to court documents.

While pursuing her doctorate, McCoy suffered serious injuries and struggled to find work after graduation due to what she said were persistent disabilities.

McCoy sought Chapter 7 relief in 2016 from the US South District of Texas Bankruptcy Court and brought adversarial proceedings against the US Department of Education seeking to pay off his student loan debt, which had climbed to $ 350,000.

Under Section 523 (a) (8) of the Bankruptcy Code, 11 USCA § 523 (a) (8), student loans are excluded from discharge unless a debtor can prove that repayment of the loans “will impose undue hardship”.

The law does not define “undue hardship”, but most circuits, including the 5th circuit, use the Brunner test.

The test requires debtors to meet its three requirements: that they cannot maintain a minimum standard of living if they are forced to repay the loans, that there are “additional circumstances” indicating that this state of things is likely to persist in the long term, and that they have made good faith attempts to repay.

The bankruptcy court ruled that McCoy, then 60, did not meet the second part of the test and that her student loans were therefore non-dischargeable.

The United States District Court for the Southern District of Texas and the 5th Circuit have both upheld.

The 5th Circuit found that the “additional circumstances” necessary to satisfy the second leg were not present as McCoy’s critical health issues arose before she took “most of the loans” and her troubles health “did not prevent her from obtaining her doctorate and various forms of employment.”

McCoy’s petition has received support from academics in consumer law and consumer rights groups, who have filed amicus briefs in support.

The government replied in its brief of May 7 that the “practical difference[s]”between the Brunner test and the set of circumstances test are” limited “and do not currently warrant consideration.

“Although the 8th Circuit described the totality approach as ‘less restrictive’ than the Brunner framework … it also observed that the burden it places on debtors is ‘onerous’, and it recognized that the distinction between the standards “maybe not that important,” the United States said in its brief.

Claudia W. Frost, Haley E. Jankowski, Kelsi B. Corkran and Thomas M. Bondy from Orrick, Herrington & Sutcliffe represented McCoy, while Michael S. Raab and Michael Shih of the US Department of Justice represented the government.