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A musician’s attempt to discharge more than $77,000 in government-insured student loans through a bankruptcy proceeding hit a sour note with the 5th U.S. Circuit Court of Appeals. On Oct. 23, a three-judge panel of the 5th Circuit affirmed a district court’s judgment reversing a decision by a bankruptcy court to discharge the student loan debt of Jonathan R. Gerhardt, principal cellist with the Louisiana Philharmonic Orchestra. In a case of first impression for the circuit, the 5th Circuit held in In the Matter of Gerhardt that a bankruptcy court’s “undue-hardship” determination is subject to de novo review. “The decision to discharge Gerhardt’s debt represents a conclusion regarding the legal effect of the bankruptcy court’s factual findings as to his circumstances,” Judge Edith Jones wrote for the court. Senior Judge Thomas Reavley and Judge Edith Clement joined Jones in the opinion. The 5th Circuit said in the opinion that Gerhardt could obtain additional employment — such as teaching full time or working as a music store clerk — to pay off his more than $1,000-a-month debt for student loans. Beth Bowman, Gerhardt’s attorney, terms that suggestion frustrating. “What other job?” she asks. Bowman, an attorney with Bowman & Howley in Gretna, La., says Gerhardt works as a part-time cello instructor at Tulane University in addition to his job with the orchestra. Evidence presented at the 2001 trial in Gerhardt showed that the only full-time cello teaching job at the college level in New Orleans is at Loyola University and the position is filled, Bowman says. Gerhardt holds the only part-time cello teaching job in higher education in the New Orleans area, she says. Bowman also questions how Gerhardt can make an extra $1,000 a month working as a clerk in a music store. “The bar is set very high in discharge of student loan cases,” says Jay Westbrook, a University of Texas School of Law professor who teaches bankruptcy law. Westbrook, who calls such cases “troubling,” says the burden always is on the student to show undue hardship when seeking to discharge student loans. “I wonder if the burden shouldn’t shift to the loan agency to show there really are jobs out there,” Westbrook says. He questions whether someone shouldn’t have the burden to show that there are other jobs that an individual with Gerhardt’s skills can do that pay $1,000 a month. The 5th Circuit also said in Gerhardt that the proper test for evaluating an undue-hardship determination was established by the 2nd Circuit in 1987′s Brunner v. New York State Higher Education Service Corp. The Brunner test requires a showing that: � The debtor cannot maintain a minimal standard of living. � Additional circumstances indicate that the debtor’s situation is likely to continue for a long time. � The debtor has made good-faith efforts to repay the loans. NOT PAYING According to the 5th Circuit’s opinion, Gerhardt filed for bankruptcy under Chapter 7 of the Bankruptcy Code and subsequently filed an adversary proceeding seeking to discharge his student loans pursuant to 11 U.S.C. � 523(a)(8). Gerhardt obtained the student loans to finance his education at the University of Southern California, the Eastman School of Music, the University of Rochester and the New England Conservatory of Music and holds a master’s degree in music from the latter institution, according to the opinion. Given that Gerhardt’s monthly expenses, which average $1,829, exceed his monthly income of $1,680, he currently has no ability to maintain a minimal standard of living if forced to repay the student loans, the 5th Circuit judges said in the opinion. But the 5th Circuit was unsympathetic to Gerhardt’s situation, noting that he’s repaid only $755 of the more than $77,000 he owes for student loans, despite the fact that he is 45 years old, healthy, well-educated and has no dependents. Judge Jones wrote that Gerhardt collects unemployment during the orchestra’s off-season in the summer months but still is able to attend the Colorado Music Festival. Although testimony at the December 2001 trial tended to show that Gerhardt would be unlikely to find a position at a higher-paying orchestra, he could seek additional steady employment in other arenas, the 5th Circuit said in the opinion. “Thus, no reasons out of Gerhardt’s control exist that perpetuate his inability to repay his student loans,” according to the opinion. “In addition, nothing in the Bankruptcy Code suggests that a debtor may choose to work only in the field in which he was trained, obtain a low-paying job, and then claim that it would be an undue hardship to repay his student loans. Under the facts presented by Gerhardt, it is difficult to imagine a professional orchestra musician who would not qualify for an undue hardship discharge,” Jones wrote for the court. “He’s not going to pay it,” Bowman says of Gerhardt’s student loan debt. “You can’t get blood out of a stone.” Thomas Watson, chief of the civil division in the U.S. Attorney’s Office for the Eastern District of Louisiana, which represents the U.S. Department of Education, says his staff argued that the 5th Circuit should adopt the Brunner test, which the court did. Watson declines further comment on the case. In its brief filed with the 5th Circuit, the U.S. Attorney’s Office also argued that Gerhardt could cut his expenses by not having cable television, Internet service, a health club membership or a cat.

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