In In re Brown, Ch. 13 Case No. 12-12316, 2013 Bankr. LEXIS 3696 (Bankr. S.D. Ga. Sept. 6, 2013), the Chapter 13 debtor deducted, on Line 57 of the Means Test, monthly student loan payments of $500 as a “deduction for special circumstances.” In her Chapter 13 plan, she proposed to make direct payments of $500 on her student loans and make a 1% distribution to unsecured creditors. The Chapter 13 Trustee objected to the plan on the grounds that the debtor was not contributing all of her disposable income to the plan. The Court sustained the objection.
Section 707(b)(2) states:
(B)(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.
Section 1325(b)(3) incorporates §707(b)(2) in Chapter 13 cases. The Court reviewed the split of authority in cases that addressed the issue of whether student loans could be deducted as special circumstances and held that such payments did not qualify for deduction on the Means Test.
While it is commendable to try and advance one’s education for career and personal advancement, the issue is whether these educational costs constitute “special circumstances” under the parameters established by Congress in §707(b)(2). There may be instances where a student loan constitutes a “special circumstance.” See In re Pageau, 383 B.R. 221 (Bankr. D.N.H. 2008) (“special circumstances” may be found where the student loan was necessitated by permanent injury, disability, or an employer closing or layoffs); see also In re Cribbs, 387 B.R. 324, 329 (Bankr. S.D. Ga. 2008) (finding that “special circumstances” must be similar to the examples set out in the statute, and finding special circumstances in the repayment of a 401(k) loan). However, under the facts of this case, the student loans do not qualify as a “special circumstance” warranting a deduction on her means test. There is nothing unique or special about Debtor’s student loans. She obtained her loans to better herself and to obtain promotions, but that does not make the loans special or unique. She was never layed off from work or forced to get an education in order to maintain her job. The fact that a bachelor’s degree may have later become a requirement does not make her loan a special circumstance. For these reasons, while Debtor’s pursuit of higher education is admirable, it is not a special circumstance under §707(b)(2)
The Court then addressed whether the debtor could make student loan payments outside the plan pursuant to §1322(b)(5), which allows a debtor to cure defaults and maintain payments on long term debts, or whether such a plan unfairly discriminates against other creditors under §1322(b)(1). Continue Reading