© 2016 by Kornfield, Nyberg, Bendes, Kuhner & Little P.C. 

Student Loan Borrower's Crimes Negate Good Faith Prong of Brunner Test

July 3, 2019

 

the 9th Circuit BAP affirmed a bankruptcy court's judgment not allowing discharge of a student loan, finding that a Debtor did not establish the third prong of the Brunner Test - whether the debtor made good faith efforts to repay the loans - where the debtor's crimes caused his financial hardship.

 

The debtor, working for the Internal Revenue Service, extracted a bribe from a medical marijuana dispensary he was auditing.The debtor was convicted and sentenced to 30 months' imprisonment.    The debtor filed bankruptcy right after this conviction and filed his dischargeability complaint while incarcerated.  The bankruptcy court found that the debtor's hardship was the result of factors completely within his reasonable control and self-inflicted by his willful criminal conduct, which outweighed his earlier good-faith efforts to repay the debt.  The court also found the timing of the discharge complaint problematic - the debtor wasted no time asserting his felony record and disbarment caused him financial hardship - the court noted he still had twenty years ahead of him to work and therefore the complaint was premature.

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