Educational Credit Management Corporation v. Jesperson
United States Court of Appeals for the Eighth Circuit
571 F.3d 775 (2009)
Mark Jesperson (defendant) owed over $300,000 to Educational Credit Management Corporation (ECMC) (plaintiff) and over $50,000 to other creditors in unpaid student loans, having repaid none of it. Earning about $4,000 monthly, living rent-free with his brother (though estimating fair rent at $500/month), and eligible for a Department of Education Income Contingent Repayment Plan that adjusts payments to his income, Jesperson sought a Chapter 7 undue-hardship discharge. The bankruptcy court, accepting Jesperson's estimates of a 33% tax bracket and his projected housing costs, found no surplus income and discharged the debt as an undue hardship; the district court affirmed, and ECMC appealed.
Whether a debtor who is reasonably likely to make significant debt repayments is entitled to an undue-hardship discharge of student loans based on the substantial size of the debt.