June 21, 2021 – McCoy v. USA, no. 20-886, cert. denied, 2021 WL 2519103 (USA, June 21, 2021).
On June 21, the High Court rejected Thelma McCoy’s plea of guilt, which sought to reconsider the Fifth Circuit Court of Appeals ruling that she did not meet the criteria in Brunner v. New York Higher Education Services Corp., 831 F.2d 395 ( 2d Cir. 1987) for repayment of student loan debt as “undue hardship”.
McCoy argued that the courts of appeal, faced with undue difficulty in determining, are “deeply divided” between the hard Brunner test used in most schemes and the “holistic, fair approach” of the cumulative test used by the 8th hearing. US District Court of Appeals and Other Counties.
The two approaches “differ sharply in both application and outcome,” and “Supreme Court intervention is necessary to ensure consistency on this important and recurring issue,” she said in her petition filed in January.
In addition, she argued that her case constituted the “ideal remedy” for resolving the district conflict, because if her case were brought to a jurisdiction outside the Brunner jurisdiction, this court would have used its discretionary power to consider “all the facts. related to excessive difficulties. “
McCoy entered college at the age of 40, first earning a bachelor’s degree, then a master’s degree in 2006 and a Ph.D. in 2014, when she borrowed $ 175,000 to fund her education, according to court records.
While working on her doctorate, McCoy suffered serious injuries and struggled to find a job after graduation due to what she says is an ongoing disability.
In 2016, McCoy filed a Chapter 7 claim for damages in the US Bankruptcy Court for the Southern District of Texas and filed a lawsuit against the US Department of Education to pay off her student loan debt, which rose to $ 350,000.
Under section 523 (a) (8) of the Bankruptcy Code, 11 USCA § 523 (a) (8), student loans are not repayable unless the debtor proves that repaying the loans “will create unreasonable difficulty.”
The statute does not define “excessive difficulty”, but most tracks, including Track 5, use the Brunner test.
The test requires debtors to meet all three of its requirements: they could not maintain a minimum standard of living if they were forced to repay loans, “there are additional circumstances” indicating that this state of affairs is likely to continue in the long term, and have taken good faith repayment attempts.
The bankruptcy court concluded that McCoy, then 60, did not meet the second test criterion and therefore her student loans were not repayable.
This was confirmed by both the US District Court for the Southern District of Texas and the 5th Circuit.
The Fifth Circuit found that the “additional circumstances” required to meet the second aspect were missing because McCoy had critical health problems before she took “most of the loans,” and her health problems “did not prevent her from pursuing her doctorate. and various forms of employment. “
McCoy’s petition was supported by consumer law academics and consumer advocacy groups who filed amicus notes in support.
The government responded in its May 7 briefing that “the practical difference[s]between the Brunner Test and the Combination Test are “limited” and do not currently require revision.
“Although the 8th District described the total approach as’ less restrictive ‘than Brunner’s structure … it also noted that the burden it places on debtors is’ strict’ and acknowledged that the distinction between standards’ may not be so significant, ”the US memo says.
Claudia W. Frost, Haley E. Jankowski, Kelsey B. Corkran, and Thomas M. Bondi of Orrick, Herrington & Sutcliffe represented McCoy, and Michael S. Raab and Michael Shea of the US Department of Justice represented the government.
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