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In re Coleman

March 25, 2009


Appeal from the United States District Court for the Northern District of California Samuel Conti, District Judge, Presiding. D.C. No. CV-05-05231-SC

The opinion of the court was delivered by: Hawkins, Circuit Judge



Argued and Submitted May 14, 2008 -- San Francisco, California

Before: Diarmuid F. O'Scannlain and Michael Daly Hawkins, Circuit Judges, and James V. Selna,*fn1 District Judge.

We consider whether "undue hardship" determinations- whereby bankruptcy courts decide whether student loans qualify for discharge-are ripe in a Chapter 13 case substantially in advance of plan completion.


Cathy Coleman filed for bankruptcy under Chapter 13 in 2004, and the bankruptcy court confirmed a five-year repayment plan. Coleman owes over $100,000 in student loans to Educational Credit. Since graduating from college, Coleman has been irregularly employed as a substitute teacher and art teacher, and was laid off in March of 2005. Just under a year after the plan was confirmed, Coleman sought a determination that it would constitute an undue hardship under 11 U.S.C. § 523(a)(8) for her to repay her student loans, and that her student loans should therefore not be excepted from discharge. Educational Credit moved to dismiss for lack of subject matter jurisdiction on ripeness grounds. The bankruptcy court denied the motion, In re Coleman, 333 B.R. 841 (Bankr. N.D. Cal. 2005), the district court affirmed the decision of the bankruptcy court, and Coleman appealed. After initially filing an Opinion in that appeal, Educ. Credit Mgmt. Corp. v. Coleman (In re Coleman), 2008 U.S. App. LEXIS 16424 (9th Cir. Aug. 1, 2008), this court noted that because the bankruptcy court's denial of Educational Credit's motion to dismiss was an interlocutory order, there was no appellate jurisdiction. Consequently, we vacated the Opinion and remanded the case to the district court in order to allow it to determine whether to certify this issue for appeal under 28 U.S.C. § 1292(b). Educ. Credit Mgmt. Corp. v. Coleman (In re Coleman), 539 F.3d 1168 (9th Cir. 2008). On remand, concluding that its order involved a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal of the issue would materially advance the termination of the litigation, the district court certified the matter for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).


We review the district court's decision on an appeal from a bankruptcy court de novo. In re Daily, 47 F.3d 365, 367 (9th Cir. 1995) (per curiam); In re Siragusa, 27 F.3d 406, 407 (9th Cir. 1994). "We apply the same standard of review to the bankruptcy court [decision] as does the district court: findings of fact are reviewed under the clearly erroneous standard, and conclusions of law, de novo." In re Tucson Estates, Inc., 912 F.2d 1162, 1166 (9th Cir. 1990). The issue of ripeness is a question of law. Chang v. United States, 327 F.3d 911, 921 (9th Cir. 2003).


[1] Debtors who seek Chapter 13 relief commit to a three-to five-year period of repayment, after which their remaining debts are discharged.*fn2 Unlike Chapter 7 debtors, who are entitled to a discharge of debt as soon as their estate is liquidated and distributed,*fn3 Chapter 13 debtors are not entitled to a discharge of debts unless and until they complete payments to creditors under a three- to five-year plan.*fn4 11 U.S.C. § 1328(a)(2).*fn5 Student loans are excepted from discharge unless the debtor can show "undue hardship." Id. §§ 523(a)(8), 1328(a)(2).*fn6 Coleman is currently making payments under her five-year Chapter 13 plan. She will not be entitled to discharge any of her debts until she completes this plan, and will not be entitled to discharge her student loans unless she can show "undue hardship."

[2] To show undue hardship, the debtor must show "(1) that she cannot maintain, based on current income and expenses, a 'minimal' standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment portion of the student loans; and (3) that the debtor has made good faith efforts to repay the loans." In re Saxman, 325 F.3d 1168, 1172 (9th Cir. 2003).

The question before us is one of timing: may Coleman obtain this undue hardship determination substantially in advance of the time she ...

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