Opinion Of Interest ' In Re Wolfson: A Potential Re-Evaluation Of The "Undue Hardship" Test For Student Loan Borrowers

• Published date: 04 March 2022
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy
• Law Firm: Mayer Brown
• Author: Ms Ashley Anglade, Aaron Gavant and Sean T. Scott

In its January 14, 2022 decision in In re Wolfson, the United States Bankruptcy Court for the District of Delaware discharged Chapter 7 debtor Ryan K. Wolfson of nearly $100,000 in student loan debt.¹ Chief Judge Laurie Selber Silverstein found that Wolfson, an often un- or underemployed and chronically ill man, met the three-prong 'Brunner test' and proved that repayment of his student loans would result in 'undue hardship' under Section 523(a)(8) of the Bankruptcy Code. Declaring most interpretations of Brunner 'unmoored from the original test and the plain language of 'undue burden,'' Judge Silverstein held that, under the Brunner test, a debtor need only show an inability to maintain 'a minimal standard of living' while repaying his or her student loans, not a total incapacity to ever repay them. In discharging the nearly six-figure debt, Judge Silverstein's opinion found that allowing lifelong student loan debts to escape discharge absent an onerous standard of undue hardship conflicted with the promise of a 'fresh start' that the Bankruptcy Code offers.

Wolfson, who graduated from Penn State University in 2010 with a degree in business and marketing, had primarily worked 'gig' and minimum-wage jobs following graduation, relying on his elderly father for financial assistance to supplement his income his entire adult life. Wolfson suffered from seizures, one of which occurred while he was a driver for a rideshare and food delivery company that led to him totaling his car in August 2019. At the age of 23, Wolfson began using medical marijuana, in accordance with Delaware law, to treat his seizures after his doctor warned him that the medication he'd been taking until then would cause major liver disease with continued usage. Since the 2019 crash, Wolfson had been unemployed although he'd applied for approximately 200 jobs and spent 1-2 hours per day job hunting. Wolfson's medical issues, however, limited his job opportunities as he could not work a job that began before 9:30 am due to the risk of seizure or after 8 pm when he needed to start using medical cannabis to help him maintain consistent quality of sleep to manage his epilepsy. Furthermore, Wolfson could not take a job that required drug testing (despite having a valid medical cannabis card pursuant to Delaware state law). Since August 2019, Wolfson had lived at home with his elderly father, whose finances and credit had also been damaged as a result of supporting his son.

Under ' 523(a)(8)...