IN RE HAHN, (Bankr.D.Wyo. 1998)

PETER McNIFF, United States Bankruptcy Judge.

The debtors' Complaint to Determine Dischargeability of a Debt came before the court for trial on August 27, 1998. The debtors seek judgment declaring student loan obligations owed by Mr. Hahn to be discharged as an undue hardship under 11 U.S.C. § 523 (a)(8). The court has considered the testimony and other evidence, the arguments of the parties, and holds that the student loan obligations are excepted from discharge.

JURISDICTION

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 157 and 1334. This case is a core proceeding within the meaning of § 157(b)(2)(I).

FINDINGS OF FACT

The debtor, Kevin D. Hahn, has student loan obligations which are held by both the Department of Education and the Colorado Student Loan Program. Mr. Hahn incurred these obligations when attending Colorado State University. He did not complete a degree.

Mr. Hahn is 26 years old, married, and has three small children. His income is approximately $17,000 per year. Mrs. Hahn is not employed but she has secretarial and computer skills and is employable. When working she has the usual child care expenses which constitute about half of her earnings. The Hahns' 1997 gross income was slightly below the Federal (Health and Human Services) poverty income guideline amount for a family of five.

The Hahns' expenses, excluding day care but including a small contribution to a retirement plan, very nearly equal their income. The Hahns are in good health and have health insurance.

The loan obligations to the defendants total approximately $10,000. Mr. Hahn has never made a voluntary payment on any of the loans.

Both defendants have established programs by which a borrower's repayment plan is structured around that person's ability to repay. Under the Department of Education repayment program, Mr. Hahn's payment would be $0 at his present salary level because his income is less than the poverty guideline level. Under the reasonable and affordable program of the Colorado Student Loan Program, his payments would be between $0 and $10 per month, calculated against standards of disposable income.

There are also provisions by which Mr. Hahn could consolidate all of the student loans into one current obligation, the loan would be considered current, and Mr. Hahn would have one agency and one payment to deal with.

CONCLUSIONS OF LAW

The debtors seek discharge of Mr. Hahn's student loans pursuant to 11 U.S.C. § 523(a)(8) which states:

A discharge under section 727 does not discharge an individual debtor from any debt

(8) for an educational loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or non-profit institution unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents[.]

The provisions of the section are to be narrowly construed. The debtor has the burden to prove a present and a future inability to make payments. In re Boston, 119 B.R. 162, 164 (Bankr.W.D.Ark. 1990). This court limits the future inability factor to the foreseeable future.

This court has previously applied what is termed the totality of the circumstances test for student loan dischargeability. That approach permits the court to apply its discretion while reviewing all relevant factors. In re Johnson, 121 B.R. 91, 93 (Bankr.N.D.Okla. 1990). Relevant factors include the debtor's good faith effort to make payments, the type of hardship in evidence, the debtor's ability, educational background, experience, other obligations, and possibilities for the future.

The debtors argue that the defendants own payment calculations for a borrower in Mr. Hahn's position (di minimis or zero) prove that an undue hardship exists. The debtor also contends that if the loans are not discharged he will be unable to obtain any other credit which is, of itself, a hardship.

Mr. Hahn has not shown any short or long term financial crisis. He is young and healthy, has good job potential, is obviously sensible and educated, and there is no indication that the Hahns' future income is likely to decrease. Most importantly, however, both agencies have described repayment plans specifically adapted to persons in Mr. Hahn's financial circumstances.

By structuring payments based on the income of the borrower, the agencies satisfy the intention of Congress to encourage repayment of the loans, while considering both the pool of funds and the borrower's circumstances. The court concludes that repayment under the agency provisions described is not an undue hardship to Mr. Hahn or his dependents. However, collection efforts on the obligations should be suspended until Mr. Hahn is established in the repayment program(s).