Vicki Metz filed a voluntary petition under Chapter 13 of the Bankruptcy Code in 2018. Metz had student loans totaling \($16,613.73\) in principal and more than \($50,000\) in accrued interest owing to Educational Credit Management Corporation (ECMC). The amount of Metz’s payments was insufficient to service the interest accruing at 9 percent annually on the principal and accrued interest.
Metz claimed that she could not meet a minimal standard of living if she was forced to repay the principal amount of the student loans plus the accrued interest. Metz worked as a community health worker and received gross annual pay ranging between \($40,000\) and \($43,000.\) Metz was single, had no dependents, lived alone, and was in her late fifties. Her expenses consisted of rent, a car payment, health and automobile insurance premiums, a small contribution to a retirement fund, groceries, dining out at fast-food restaurants, liquor, cigarettes, and occasional visits to a casino. She occasionally exceeded her monthly budget for these items, and her bank account was overdrawn at times. ECMC opposed the request to discharge the interest payments.
Section 523(a)(8) of the Bankruptcy Code provides that an educational loan is not dischargeable in bankruptcy “unless excepting such debt from discharge would impose an undue hardship on the debtor and the debtor’s dependents.” The court was required to determine whether Metz would suffer undue hardship if required to repay the loans in full with interest and what factors constitute a minimal standard of living to which Metz was entitled.
1. How would you define “undue hardship” for purposes of obtaining relief from student loan repayment obligations?
2. What factors would you take into consideration in determining what constitutes a “minimal standard of living”?