Vera Thomas is more than 60 years old and suffers from diabetic neuropathy, “a degenerative condition that causes pain in her lower extremities.” Unemployed and suffering from a chronic illness, she filed for bankruptcy in 2017 in the hope that she could discharge her student loans in bankruptcy.
At the time of her bankruptcy proceedings, Thomas was living in dire poverty. Her monthly income was less than $200 a month and she was surviving on “a combination of public assistance and private charity.”
How much did Ms. Thomas owe on her student loans? She borrowed $7,000 back in 2012 and she used her loan money to attend community college for two semesters. Thomas didn’t return for the third semester, and she only paid loan payments totally less than $85.
Judge Harlin Hale, a Texas bankruptcy judge, applied the three-part Brunner test to determine whether Thomas would suffer an “undue hardship” if forced to pay off her student loans. Part one required her to show that she could not pay back her student loans and maintain a minimal standard of living. Thomas clearly met this part of the test.
Brunner’s second part required Thomas to establish that circumstances beyond her control made it unlikely that she would ever be able to repay her student loans. The U.S. Department of Education argued that Thomas could not meet this part of the Brunner test and Judge Hale agreed. In spite of her debilitating illness, he concluded, Thomas could not show that she was “completely incapable of employment now or in the future.” Surely there was some sedentary work she was capable of doing, Judge Hale reasoned.
In short, Judge Hale denied Thomas’s request for bankruptcy relief from her student loans. He expressed sympathy for Ms. Thomas’s situation, but he said that during his entire time on the bench, he had never granted student-loan bankruptcy relief over the objection of the lender (the U.S. Department of Education or its contracted debt collectors).
Thomas appealed to a U.S. District Court, which affirmed Judge Hale’s decision; and then she appealed to the Fifth Circuit Court of Appeals. Two public interest groups came to her aid by filing an amicus brief. The National Consumer Bankruptcy Rights Center and the National Association of Consumer Bankruptcy Attorneys argued that the Brunner test was no longer an appropriate standard for determining whether a student-loan debtor is entitled to bankruptcy relief and should be overruled.
But the Fifth Circuit refused to abandon the Brunner test or even to soften the way it is interpreted. Unless the Supreme Court or an en banc panel of the Fifth Circuit overrules Brunner, the Fifth Circuit panel stated, it was bound by that decision.
The Fifth Circuit decision implicitly acknowledged that the federal student-loan program poses an enormous public-policy problem, but in the court’s view, it was not the judiciary’s job to fix it: “[T]he fact that student loans are now mountainous in quantity poses systematic issues far beyond the capacity or authority of courts, which can only interpret the written law… Ultimate policy issues raised by Ms. Thomas and the amicus are for Congress, not the courts.”
So what does the future hold for Vera Thomas? Her student-loan debt is undoubtedly far larger today than it was when she initially borrowed $7,000 to enroll at a community college back in 2012. Over the years, interest has accrued and perhaps penalties and fees. In the aftermath of the Fifth Circuit’s decision, it seems likely that Vera Thomas’s only viable option is to sign up for an income-driven repayment plan, which will terminate when she is 85 years old.