Bankruptcy – Student loans – Hardship

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Where a debtor has requested a discharge of his student loan obligations, that request should be granted because the debt owed to the defendant Educational Credit Management Corporation imposes an undue hardship on the debtor.

“This matter came before the Court on the amended complaint filed by the plaintiff, chapter 7 debtor Mikel E. Satcher (the ‘Debtor’) against the defendant Educational Credit Management Corporation (‘ECMC’). Pursuant to the amended complaint, the Debtor seeks a determination under Section 523(a)(8) of the Code that his student loan obligations to ECMC are discharged because excepting the debt from discharge would impose an undue hardship on him. For the reasons set forth below, the Court finds that the student loan debt of the Debtor to ECMC is discharged. …

“… Given his current and future financial resources, the Debtor cannot maintain a reasonable, minimal standard of living and make payments on the student loans. …

“… In sum, the Debtor’s reasonable future financial resources will not sufficiently cover payment of the student loan debt while still allowing for a minimal standard of living.

“ECMC has failed to demonstrate bad faith of the Debtor that would block his ability to obtain a discharge of the student loan debt. ECMC bases its argument of a lack of good faith only on its claim that the Debtor has the ability to resolve his student loan debt through [Revised Pay as You Earn Plan (REPAYE)] but is unwilling to do so. But ECMC failed to demonstrate that the Debtor is eligible for REPAYE, and, if eligible, that the Debtor could make the payments.

“In order for REPAYE to constitute a factor in this analysis, the Debtor must be eligible to participate in it. ECMC contends that he is not presently eligible but would become so if he were to consolidate his loans into the Direct Loan program. But ECMC has not provided the criteria for this eligibility, nor demonstrated that the Debtor could meet those requirements. Without knowing those criteria, the Court cannot determine whether the Debtor satisfies them. It is not bad faith for a debtor to be unwilling to participate in an income based program for which his eligibility is not established.

“ECMC’s reliance on the REPAYE option also fails for the reason that the Debtor cannot afford the payments under such a plan. Given the Debtor’s income at trial, ECMC contends the Debtor would be required to pay $330.66 per month, with the payment amount adjusted annually based on his income. But, as discussed in the findings above, the Debtor presently has no surplus income to make a payment in any amount. This situation is unlikely to improve either before or during the Debtor’s retirement. Therefore, the burden remains more than he can afford. A debtor’s refusal to subject himself to a burden that would make him unable to sustain a minimal standard of living is not bad faith. …

“For the foregoing reasons, the Court finds that the debt owed by the Debtor to ECMC imposes an undue hardship on the Debtor and is dischargeable under Section 523(a)(8) of the Code.”

In re: Satcher, Mikel Edward (Lawyers Weekly No. 04-010-25) (22 pages) (Bostwick, J.) (Chapter 7 Case No. 05-24716-JEB; Adversary Proceeding No. 18-01189-JE) (Oct. 6, 2025).

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