## Facts

- Denise Megan Bronsdon filed Chapter 7 bankruptcy and sought to discharge approximately $82,049 in federal student loans held by Educational Credit Management Corporation (ECMC) under 11 U.S.C. § 523(a)(8).
- At trial, Bronsdon was 64 years old, single, had no dependents, and had no disabling medical condition.
- Bronsdon earned a B.A. in English in 1994 and later graduated from law school in 2005, financing her education with student loans.
- She failed the bar exam three times by significant margins and testified she did not intend to retake it due to cost and low likelihood of passing.
- After law school, she held only short-term or low-level positions and could not obtain stable legal employment.
- She had no significant assets and subsisted primarily on approximately $946 per month in Social Security benefits, with modest and reasonable living expenses.
- Under the William D. Ford Federal Direct Loan Program’s Income Contingent Repayment Plan (ICRP), her income would have produced a $0 monthly payment, but long-term participation could result in loan forgiveness treated as taxable income and potential collection against Social Security.

## Issues

1. In determining “undue hardship” under 11 U.S.C. § 523(a)(8) in the First Circuit, must bankruptcy courts apply the Brunner test, or may they apply a totality-of-the-circumstances approach?
2. Does a debtor’s failure to enroll in the Ford Program/ICRP, where payments would be reduced to zero, preclude a finding of undue hardship or show lack of good faith?

## Decision

- The Bankruptcy Appellate Panel affirmed the bankruptcy court’s judgment discharging Bronsdon’s student loan debt as an undue hardship.
- The panel held that bankruptcy courts in the First Circuit are not required to apply the Brunner test and may apply a totality-of-the-circumstances test.
- The panel held that Bronsdon’s failure to enroll in ICRP did not bar discharge and did not, by itself, establish lack of good faith.
- The panel approved the bankruptcy court’s consideration of ICRP as one factor, including the risk that eventual forgiveness could create tax debt and jeopardize Social Security income.

## Legal Principles

- Student loans are nondischargeable absent proof that repayment would impose “undue hardship” under 11 U.S.C. § 523(a)(8).
- The First Circuit has not mandated the Brunner framework; bankruptcy courts may evaluate undue hardship under a totality-of-the-circumstances test considering:
  - the debtor’s past, present, and reasonably reliable future financial resources;
  - reasonably necessary living expenses; and
  - other relevant case-specific circumstances.
- Eligibility for income-driven repayment (including a $0 payment) is relevant but not dispositive; courts may weigh long-term consequences such as prolonged indebtedness and potential tax liability from forgiveness.
- Good faith is a relevant consideration under the totality approach, but nonparticipation in ICRP is not per se bad faith and does not automatically defeat undue hardship.

## Conclusion

The panel affirmed discharge of Bronsdon’s student loans, holding that a holistic undue-hardship analysis is permissible in the First Circuit and that declining income-contingent repayment does not automatically negate undue hardship or good faith, especially where the debtor’s age, limited earning prospects, and Social Security-only income make repayment unrealistic and ICRP could create future financial harm.


Bronsdon v. Educ. Credit Mgmt. Corp. (In re Bronsdon), 435 B.R. 791 (B.A.P. 1st Cir. 2010)