## Facts

- Vera Frances Thomas, over 60, filed Chapter 7 bankruptcy in 2017 and later sought to discharge federal student loans as an undue hardship under 11 U.S.C. § 523(a)(8).
- In 2012, while working at a call center earning about $11.40 per hour, she took two federal student loans of $3,500 each to attend community college; she did not continue after two semesters.
- The loans entered repayment in December 2013; she made two payments of about $41 each in 2014.
- In 2014, Thomas was diagnosed with diabetic neuropathy, causing pain, weakness, numbness, and difficulty standing for prolonged periods; she took unpaid leave and incurred medical expenses.
- In 2016, following an acquisition of her employer, she was fired for violating company policies and was ineligible for unemployment benefits.
- Thomas moved to Texas, lived with her then-boyfriend, and worked briefly in positions requiring standing (including retail/food service and package handling), but could not maintain those jobs due to her condition.
- By the time of trial in the adversary proceeding, she was unemployed and relied on public assistance and private charity, with monthly income around $194 and monthly expenses around $640.

## Issues

1. Whether Thomas established “undue hardship” under 11 U.S.C. § 523(a)(8) to discharge her student loans.
2. Whether the bankruptcy court clearly erred in finding Thomas failed Brunner’s second prong requiring additional circumstances showing her inability to repay would persist for a significant portion of the repayment period.
3. Whether the Fifth Circuit panel could replace the circuit’s Brunner standard (as adopted in In re Gerhardt) with a “totality of the circumstances” approach.

## Decision

- The Fifth Circuit affirmed the denial of discharge.
- The court held it was bound by circuit precedent adopting the Brunner test and declined to reconsider the standard absent en banc or Supreme Court action.
- The court accepted that Thomas met Brunner’s first prong (inability to maintain a minimal standard of living if forced to repay).
- The court held the bankruptcy court did not clearly err in finding Thomas failed Brunner’s second prong because the record did not show her current condition and unemployment were likely to persist for a significant portion of the repayment period.
- Because failure on the second prong was dispositive, the court did not need extended analysis of Brunner’s third prong.

## Legal Principles

- Student loans are nondischargeable in bankruptcy unless the debtor proves “undue hardship” under 11 U.S.C. § 523(a)(8).
- In the Fifth Circuit, “undue hardship” is evaluated under the three-part Brunner test as adopted in In re Gerhardt.
- Brunner requires proof that: (1) the debtor cannot maintain a minimal standard of living if forced to repay; (2) additional circumstances show this state of affairs is likely to persist for a significant portion of the repayment period; and (3) the debtor made good-faith efforts to repay.
- A Fifth Circuit panel must follow prior circuit precedent unless it is overruled en banc or by the Supreme Court.
- On appellate review, factual findings underlying the Brunner analysis are reviewed for clear error; failure to prove the second prong defeats discharge even where current finances are dire.

## Conclusion

The Fifth Circuit held that, although Thomas’s present income and expenses supported inability to pay now, she did not carry her burden to show the inability to repay would likely persist for a significant part of the repayment period, so her student loans remained nondischargeable under § 523(a)(8).


Thomas v. Dep’t of Educ. (In re Thomas), 931 F.3d 449 (5th Cir. 2019)