Education Resources Institute, Inc. v. Zumbro (In Re Zumbro) , 536 F. App'x 991 ( 2013 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
__________________________
No. 13-11868
Non-Argument Calendar
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D.C. Docket No. 1:12-cv-00080-JRH-WLB,
Bkcy No. 09-11145
In re:
KANDACE ZUMBRO,
Debtor.
_____________________________________________________
THE EDUCATION RESOURCES INSTITUTE, INC.,
Plaintiff-Appellant,
versus
KANDACE ZUMBRO,
Defendant-Appellee.
__________________________
Appeal from the United States District Court
for the Southern District of Georgia
__________________________
(October 3, 2013)
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Before PRYOR, JORDAN, and COX, Circuit Judges.
PER CURIAM:
The issues in this appeal involve the dischargeability of student loans co-
signed by Kandace Zumbro. The Education Resources Institute, Inc. (which had
guaranteed the loans) appeals the district court’s order affirming the bankruptcy
court’s order finding those loans dischargeable. We affirm.
While married to Jerry J. Lee, Jr., Kandace Zumbro co-signed three
promissory notes, along with Lee and his father, to obtain loans for Lee’s medical
education. Despite receiving his medical education, and completing his residency
in 1996, Lee only practiced medicine for a few years and ultimately surrendered
his medical license in 2003. Two years later, in 2005, Lee was arrested for
molesting his nine-year-old daughter. He has been incarcerated ever since, and
that same year, Zumbro filed for divorce.
Zumbro’s obligation under two of the promissory notes became fully due in
2006, while her obligation under the third promissory note does not become fully
due until 2016. Lee’s student loan debt was not the only debt Zumbro incurred
because of her marriage to Lee. Lee lived a lavish lifestyle and incurred large
consumer debts as well. After Lee’s incarceration, Zumbro filed a petition for
relief pursuant to Chapter 13 of the Bankruptcy Code in an effort to discharge
these debts. As part of her larger effort to restructure her finances, Zumbro also
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filed a complaint seeking to discharge her liability on Lee’s student loan debt. The
bankruptcy court initially found the student loan debt to be non-dischargeable.
Later, though, it reversed its prior ruling and discharged the debt because
previously it had mistakenly assumed that Zumbro could restructure and refinance
the debt under 34 C.F.R. § 685.208. On appeal to the district court, the court
affirmed the bankruptcy court’s order discharging the student loan debt.
The Education Resources Institute, Inc. (“Institute”) presents four issues on
appeal. First, the Institute contends that Zumbro did not prove by a preponderance
of the evidence each of the three prongs of the Brunner test required for a showing
of undue hardship. Second, the Institute contends that the inapplicability of 34
C.F.R. § 685.208 does not override the evidence underpinning the bankruptcy
court’s initial order finding the student loan debt to be non-dischargeable. 1 Third,
it contends that the bankruptcy court erred in reconsidering and reversing its earlier
order finding the loans to be non-dischargeable. Finally, it contends that the
district court erred in affirming the bankruptcy court’s order. Zumbro’s response is
that the court was correct in finding the student loan debt dischargeable and that
she did carry her burden to show that repaying the loans would constitute an undue
hardship by proving, by a preponderance of the evidence, each prong of the
1
While the Institute raises this as a separate issue on appeal, the effect of the applicability
of 34 C.F.R. § 685.208 goes to whether Zumbro carried her burden under the second prong of
the Brunner analysis. The district court correctly analyzed it in this manner.
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Brunner test. She also maintains that the inapplicability of 34 C.F.R. § 685.208does change the analysis under Brunner and that its inapplicability supported the
bankruptcy court’s order reversing its prior ruling. Because the bankruptcy court
incorrectly believed, when issuing its first order, that Zumbro was eligible to
restructure her student loan debt under 34 C.F.R. § 685.208, it found that Zumbro
had not satisfied her burden that she met the second prong of the Brunner test: that
her current state of affairs was likely to persist for a significant portion of the
repayment period. 34 C.F.R. § 685.208 allows borrowers of certain government
issued student loans to restructure their payments for up to a thirty year period. See
34 C.F.R. § 685.208 (emphasis added). However, upon Zumbro’s petition for
reconsideration, the bankruptcy court reversed its position because Zumbro’s loans
were not government-issued and Lee, not Zumbro, was the borrower, thus
rendering Zumbro ineligible for the extended loan repayment period under 34
C.F.R. § 685.208. For that reason, Zumbro contends that the bankruptcy court did
not err in reversing its previous order and that the district court did not err in
affirming the reversal.
We employ the same standard of review as the district court when reviewing
bankruptcy court decisions that have already been appealed to the district court. In
re New Power Co., 438 F.3d 1113, 1117 (11th Cir. 2006) (citing In re Optical
Techs, Inc., 425 F.3d 1294, 1299-1300 (11th Cir. 2005)). Legal conclusions by
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either the bankruptcy court or the district court are reviewed de novo. In re Fin.
Federated Title & Trust, Inc., 309 F.3d 1325, 1328-29 (11th Cir. 2002) (citing
Capital Factors, Inc. v. Empire for Him, Inc. (In re Empire for Him, Inc.), 1 F.3d
1156, 1159 (11th Cir. 1993). The bankruptcy court’s findings of fact are reviewed
for clear error. Id. (citing Rush v. JLJ, Inc. (In re JLJ, Inc.), 988 F.2d 1112, 1116
(11th Cir. 1993)).
In upholding the bankruptcy court’s order discharging the student loan debt,
the district court addressed, and rejected, each of the Institute’s contentions on this
appeal. We conclude that each of the Institute’s contentions was properly rejected
for the reasons stated in the district court’s order. (Dkt. 13 at 2, 6.) Accordingly,
we affirm.
AFFIRMED.
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