           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                      2    In re Miller                                No. 03-5167
        ELECTRONIC CITATION: 2004 FED App. 0246P (6th Cir.)
                    File Name: 04a0246p.06                                                  _________________
UNITED STATES COURT OF APPEALS                                                                   COUNSEL
                  FOR THE SIXTH CIRCUIT                                 ON BRIEF: Stephen P. Hale, HUSCH & EPPENBERGER,
                    _________________                                   Memphis, Tennessee, Holly N. Knight, HUSCH &
                                                                        EPPENBERGER, Nashville, Tennessee, for Appellant. N.
                                                                        David Roberts, Jr., BAILEY, ROBERTS & BAILEY,
 In re: PATRICIA M. MILLER,     X                                       Knoxville, Tennessee, for Appellee.
                       Debtor. -
 ________________________ -                                                                 _________________
                                 -           No. 03-5167
                                 -                                                              OPINION
 PATRICIA M. MILLER,              >
                                 ,                                                          _________________
            Plaintiff-Appellee, -
                                 -                                         JULIA SMITH GIBBONS, Circuit Judge. Plaintiff-
           v.                    -                                      appellee Patricia Miller sought full discharge of her student
                                 -                                      loan debt by filing an adversary complaint in bankruptcy
 PENNSYLVANIA HIGHER             -                                      court notwithstanding that over ninety-nine percent of her
                                 -                                      outstanding student loan obligations remained unpaid. The
 EDUCATION ASSISTANCE                                                   bankruptcy court relied on 11 U.S.C. § 105(a) to grant Miller
                                 -
 AGENCY , STUDENT                -                                      a partial discharge by dismissing more than half of her student
 SERVICING CENTER ,              -                                      loan debt. The district court upheld this discharge. The
          Defendant-Appellant. N                                        guarantor of Miller’s student loans appealed, arguing that
                                                                        discharge of student loan debt is only available upon a finding
                                                                        of “undue hardship” pursuant to the bankruptcy code,
           Appeal from the United States District Court                 11 U.S.C. § 523(a)(8). For the reasons set forth below, we
        for the Eastern District of Tennessee at Knoxville.             reverse the decision of the district court, which affirmed the
         No. 02-00378—R. Leon Jordan, District Judge.                   order of the bankruptcy court, and remand this case for a
                                                                        determination of whether Miller has shown undue hardship
                    Submitted: June 9, 2004                             with respect to the portion of her student loans that the court
                                                                        discharged.
               Decided and Filed: July 28, 2004
                                                                                                      I.
Before: SILER and GIBBONS, Circuit Judges; REEVES,
                  District Judge.*                                       Miller received a Bachelor of Arts degree from Juniata
                                                                        College in 1988, a Masters of Arts in Philosophy from the
                                                                        University of Tennessee-Knoxville (“UT”) in 1992, and
    *
     The Hono rable Danny C. Reeves, United States District Judge for   worked towards a Doctorate of Philosophy at UT from 1992
the Eastern D istrict of K entuck y, sitting by de signation.

                                 1
No. 03-5167                                 In re Miller     3    4     In re Miller                                 No. 03-5167

to 1997. She failed to complete the requirements for the          her adversary action, Miller was employed full-time as an
doctoral degree. To pay for her education, Miller received        administrative assistant at a construction company and part-
various student loans that are presently guaranteed by the        time as a call center representative.
Pennsylvania Higher Education Assistance Agency
(“PHEAA”). After leaving UT, she requested and received             The bankruptcy court held a trial on April 30, 2002. The
forbearances and deferments on her student loans.                 court found that all of Miller’s student loan debts were not
                                                                  dischargeable pursuant to 11 U.S.C. § 523(a)(8) because the
  On May 30, 2001, Miller filed a Chapter 7 bankruptcy            full amount of the debts did not impose an undue hardship
petition. Shortly thereafter, she filed an adversary action in    upon her. Notwithstanding this finding, the bankruptcy court
the United States Bankruptcy Court for the Eastern District of    granted Miller a partial discharge of her student loan
Tennessee against PHEAA seeking discharge of all of her           indebtedness.       The court decided that Miller’s
outstanding student loan debt, which totaled $89,832.16, as of    nondischargeable student loan obligation was $34,200.00 and
April 26, 2002. At the time that she filed the adversary          accordingly dismissed the balance of her student loans, an
action, Miller had made payments of only $368.00 towards          amount of approximately $55,000.00. PHEAA appealed the
her student loans, an amount that represented less than half of   judgment of the bankruptcy court to the United States District
one percent of her student loan obligations. Miller described     Court for the Eastern District of Tennessee. Miller cross-
her monthly expenses as follows:                                  appealed. The district court adopted the opinion of the
                                                                  bankruptcy court and dismissed the appeals of both parties.
  rent: $395.00;                                                  PHEAA then filed a timely notice of appeal of the district
  utility payments: $75.00;                                       court’s decision.
  cable television: $45.00;
  telephone charges: $90.00;                                                                     II.
  cell phone expenses: $40.00;
  internet service expenses: $25.00;                                A discharge in Chapter 7 bankruptcy does not discharge an
  food: $275.00;                                                  individual debtor’s student loan obligations “unless excepting
  clothes: $75.00;                                                such debt from discharge . . . will impose an undue hardship
  laundry: $30.00;                                                on the debtor and the debtor’s dependents.” 11 U.S.C.
  prescriptions, herbs, medical expenses: $65.00;                 § 523(a)(8). In this case, the bankruptcy court found that
  magazines/books: $15.00;                                        Miller had not made a showing of undue hardship.
  transportation (not including auto payments or repair           Nevertheless, the court relied on 11 U.S.C. § 105(a), which
  work): $110.00;                                                 provides that a court “may issue any order, process, or
  auto payment with insurance: $250.00;                           judgment that is necessary or appropriate to carry out the
  auto repairs and maintenance: $100.00; and                      provisions of this title,” to grant Miller a partial discharge of
  other expenses: $115.10.                                        her student loan obligations.

Miller is single and has no dependents. As of 2001, her gross       PHEAA argues that a showing of undue hardship – as
annual income was $26,464.00. In that same year, she              provided by § 523(a)(8) – is the only means by which a court
received a gift of $3,000.00 from a friend and a $300.00          can discharge student loan indebtedness. According to
adjustment from the Internal Revenue Service. At the time of      PHEAA, since Miller has not made a showing of undue
No. 03-5167                                  In re Miller     5    6      In re Miller                               No. 03-5167

hardship, none of her educational loan debt is dischargeable.      how bankruptcy courts provide debtors with the “benefit of a
The central issues of this appeal are, therefore, whether a        fresh start”:
bankruptcy court can rely on § 105(a) to grant a partial
discharge of student loan indebtedness and whether, before a           Where a debtor’s circumstances do not constitute undue
bankruptcy court grants such a discharge, it must first find           hardship, some bankruptcy courts have thus given a
that the portion being discharged satisfies the “undue                 debtor the benefit of a “fresh start” by partially
hardship” requirement of 11 U.S.C. § 523(a)(8). In reviewing           discharging loans, whether by discharging an arbitrary
a bankruptcy case appealed from a district court, this court           amount of the principal, interest accrued, or attorney’s
reviews the bankruptcy court’s findings of fact for clear error        fees; by instituting a repayment schedule; by deferring
and conclusions of law de novo. City of White Plains v. A &            the debtor’s repayment of the student loans; or by simply
S Galleria Real Estate, Inc. (In re Federated Dep’t Stores,            acknowledging that a debtor may reopen bankruptcy
Inc.), 270 F.3d 994, 999 (6th Cir. 2001).                              proceedings to revisit the question of undue hardship.

   Although the bankruptcy court found that Miller was not         Id. Hornsby also explained the need for taking action short of
entitled to a complete discharge of her educational loans, the     full discharge of a debtor’s student loans in this way: “In a
court utilized its § 105(a) powers to partially discharge her      student-loan discharge case where undue hardship does not
student loans. This court has sanctioned such a procedure.         exist, but where facts and circumstances require intervention
See Hornsby v. Tenn. Student Assistance Corp. (In re               in the financial burden on the debtor, an all-or-nothing
Hornsby), 144 F.3d 433, 439-40 (6th Cir. 1998). In Hornsby,        treatment thwarts the purpose of the Bankruptcy Act.” Id. at
we disagreed with the bankruptcy court’s finding that Chapter      439.
7 debtors had shown that repayment of the entire balance of
their student loans would impose an undue hardship upon              We construe the language of these passages as providing
them. Id. at 438. While we concluded that the debtors were         guidance to bankruptcy courts in circumstances where
not entitled to a full discharge of their student loans pursuant   granting a full discharge of student loan indebtedness is
to § 523(a)(8), we found that § 105(a) empowered the               unwarranted because the debtor cannot show that excepting
bankruptcy court “to take action short of total discharge.” Id.    the entire balance of her student loans from discharge would
at 438-39. As will be explained below, we view Hornsby as          impose undue hardship but where some form of relief seemed
authorizing the grant of a partial discharge of a debtor’s         warranted – the precise factual conclusion reached about the
student loans but only when certain requirements are met.          Hornsbys. Therefore, when a debtor does not make a
                                                                   showing of undue hardship with respect to the entirety of her
  Our holding in Hornsby was that, “pursuant to its powers         student loans, a bankruptcy court may – pursuant to its
codified in § 105(a), the bankruptcy court . . . may fashion a     § 105(a) powers – contemplate granting the various forms of
remedy allowing the Hornsbys ultimately to satisfy their           relief discussed in Hornsby, including granting a partial
obligations to [their loan guarantor] while at the same time       discharge of the debtor’s student loans. See DeMatteis v.
providing them some of the benefits that bankruptcy brings in      Case W. Reserve Univ. (In re DeMatteis), No. 02-3003, 2004
the form of relief from oppressive financial circumstances.”       WL 445167, at *3 (6th Cir. Mar. 8, 2004) (“Although the
Id. at 440. While the Hornsby decision did not direct the          Hornsby decision is not perfectly clear on the question of
bankruptcy court as to what precise remedy should be               partial discharge, the best reading is that Hornsby does in fact
provided to the debtors in that case, the decision did explain     contemplate partial discharge under § 105.”). Accordingly,
No. 03-5167                                  In re Miller       7   8        In re Miller                                     No. 03-5167

PHEAA’s assertion that a bankruptcy court must rely                     debt would be an undue hardship, some bankruptcy
exclusively on § 523(a)(8) to grant any discharge of student            courts have partially discharged student loans even while
loans in bankruptcy must fail.                                          finding the student loans nondischargeable. See, e.g.,
                                                                        Griffin v. Eduserv (In re Griffin), 197 B.R. 144, 147
  While Hornsby contemplated the grant of a partial                     (Bankr. E.D. Okla. 1996) (“[I]t would be an ‘undue
discharge of student loan debt pursuant to § 105(a), our                hardship’ for the Debtors to pay any of the accrued
decision did not clearly address whether, in accordance with            interest and attorneys’ fees associated with . . . student
§ 523(a)(8), the debtor must show that the portion of her               loans.”); Bakkum v. Great Lakes Higher Educ. Corp. (In
student loan debt being discharged would impose an undue                re Bakkum), 139 B.R. 680, 684 (Bankr. N.D. Ohio 1992)
hardship if that portion was not discharged in bankruptcy.              (“The Court, at its discretion, may excuse any portion of
Moreover, the decision did not address precisely when “facts            the Debtor’s student loan obligation which would create
and circumstances” require relief short of full discharge of a          an undue hardship.”).
debtor’s student loans. Hornsby acknowledged, however, the
correct proposition that a bankruptcy court may only act            144 F.3d at 440. The limiting condition placed on this
pursuant to § 105(a) “so long as such action is consistent with     discussion – “[w]here a debtor’s circumstances do not
the Bankruptcy Act.” 144 F.3d at 439. Although § 105(a)             constitute undue hardship as to part of the debt but repayment
permits a bankruptcy court to use its equity powers to “issue       of the entire debt would be an undue hardship” – supports the
any order, process, or judgment that is necessary or                notion that bankruptcy courts discharge the portion of student
appropriate to carry out the provisions of this title,” “[t]he      loan debt for which payment would impose an undue
equitable powers of section 105(a) may only be used in              hardship on the debtor. For example, assume that a debtor
furtherance of the goals of the Code.” Childress v. Middleton       owes $100,000 in student loans, and repayment of the full
Arms, L.P. (In re Middleton Arms, Ltd. P’ship), 934 F.2d 723,       amount would impose undue hardship on the debtor but
725 (6th Cir. 1991). As the Supreme Court has recognized,           repayment of $40,000 would not. Hornsby indicates that a
“whatever equitable powers remain in the bankruptcy courts          bankruptcy court would discharge $60,000 of the debt, the
must and can only be exercised within the confines of the           amount for which repayment would impose an undue
Bankruptcy Code.” Norwest Bank Worthington v. Ahlers,               hardship.1 The citations quoted by Hornsby also support the
485 U.S. 197, 206 (1988). Therefore, it cannot be true that         conclusion that undue hardship must be shown for the
Hornsby endorsed the idea that, while § 523(a)(8) sets the          discharged amount. Accordingly, at a minimum, we do not
condition for “[a] discharge” of student loan indebtedness, a       read Hornsby as rejecting any interplay between the undue
bankruptcy court could rely on § 105(a) to evade the plain          hardship requirement of § 523(a)(8) and the partial discharge
language of that provision by granting a partial discharge for      of student loans pursuant to § 105(a).
reasons other than undue hardship.
  Furthermore, we point out that, in leading up to its holding,
Hornsby framed its discussion of how bankruptcy courts grant             1
                                                                         In fact, other courts have read Hornsby in this fashion. See N ary v.
a partial discharge in these terms:                                 Comp lete Source (In re Nary), 253 B.R. 752, 767 (N.D. Tex. 2000)
                                                                    (“[This court] therefo re adopts the hold ing of Hornsby that § 105(a)
  Where a debtor’s circumstances do not constitute undue            authorizes a bankruptcy court to grant a partial discharge where the undue
  hardship as to part of the debt but repayment of the entire       hardship requirement of § 523(a)(8) is met as to part but no t all of a
                                                                    student loan.”).
No. 03-5167                                  In re Miller     9    10   In re Miller                                 No. 03-5167

   We acknowledge that this understanding of Hornsby is at         have not cited any authority from our sister circuits that
odds with the unpublished opinion of this court in DeMatteis       embraces the idea that a partial discharge of student loan debt
v. Case Western Reserve University, a decision that we are         can be granted without a finding of undue hardship, and
not bound to follow. See Bell v. Johnson, 308 F.3d 594, 611        indeed we were unable to locate any such case law. In fact,
& n.7 (6th Cir. 2002); Salamalekis v. Comm’r of Soc. Sec.,         the weight of authority fits squarely with our conclusion. See
221 F.3d 828, 833 (6th Cir. 2000) (both explaining that            Saxman v. Educ. Credit Mgmt. Corp. (In re Saxman), 325
unpublished decisions are not binding on this court). The          F.3d 1168, 1175 (9th Cir. 2003) (“We therefore conclude that
court in DeMatteis rejected the conclusion of the bankruptcy       before the bankruptcy court can partially discharge student
appellate panel in that case that, in the context of discharging   debt pursuant to § 105(a), it must first find that the portion
student loans, § 105(a) acts as an “overlay” on § 523(a)(8).       being discharged satisfies the requirements under
2004 WL 445167, at *2-3. Rather, the DeMatteis court               § 523(a)(8).”); Hemar Ins. Corp. of Am. v. Cox (In re Cox),
reasoned that Hornsby should be read as advocating an              338 F.3d 1238, 1243 (11th Cir. 2003) (rejecting debtor
“independent § 105 equitable grounds theory.” Id. at *3.           argument that § 105 allows a bankruptcy court to partially
                                                                   discharge student loans if the undue hardship burden is not
   This determination in DeMatteis suggests that the grant of      met and instead holding that “[t]he bankruptcy court’s
a partial discharge of student loan indebtedness pursuant to       equitable powers . . . do not allow it to override the specific
§ 105(a) need not be made upon a showing of undue hardship         statutory language found in § 523(a)(8)”); Educ. Credit
with regard to the amount discharged. We cannot accept this        Mgmt. Corp. v. Moore, No. 02-17519, 97 Fed. Appx. 88, 89
conclusion. First, we believe that the plain text of the           (9th Cir. Mar. 15, 2004) (holding that debtor is not entitled to
bankruptcy code as well as the language of Hornsby, as             partial discharge of student loans when debtor has not shown
already discussed, point to a contrary conclusion. Second,         undue hardship pursuant to 11 U.S.C. § 523(a)(8)); Educ.
besides ignoring that § 523(a)(8) specifically governs             Credit Mgmt. Corp. v. Blair (In re Blair), 291 B.R. 514, 520
discharges of student indebtedness, relying on § 105(a)            (B.A.P. 9th Cir. 2003) (finding that bankruptcy court erred in
independently provides no rubric with which bankruptcy             granting partial discharge of student loan debt when debtor
courts are able to evaluate whether to grant a partial discharge   had not established undue hardship); see also Tenn. Student
of student loan indebtedness to a debtor in bankruptcy.            Assistance Corp. v. Mort (In re Mort), 272 B.R. 181, 185
Pursuant to the reading of Hornsby given in DeMatteis,             (W.D. Va. 2002) (concluding that “[t]he authority to grant the
bankruptcy courts may grant a full discharge of student loan       discharge of a student loan debt – whether of the whole debt
debt only when the debtor shows that excepting her entire          or only a portion thereof – must be conditioned upon a
student loan burden would impose an undue hardship, but a          finding of undue hardship”); cf. Banks v. Sallie Mae Servicing
court may grant a partial discharge – including a discharge in     Corp. (In re Banks), 299 F.3d 296, 300 (4th Cir. 2002)
excess of fifty percent of outstanding student loan obligations    (“Allowing the Debtor to pay off loan principal without first
– for whatever reason it views as being encompassed by the         permitting the application of the payment to satisfy
court’s equitable authority under § 105(a).                        postpetition interest would reduce the overall amount that the
                                                                   Debtors would have to pay . . . thus allowing the Debtors to
  In sum, we stress that the requirement of undue hardship         accomplish indirectly what they could not accomplish directly
must always apply to the discharge of student loans in             under the plain language of §523(a)(8), i.e., a partial
bankruptcy – regardless of whether a court is discharging a        discharge of the interest on their student loan debts without a
debtor’s student loans in full or only partially. The parties      showing of undue hardship.”) (alteration in original).
No. 03-5167                                         In re Miller      11     12   In re Miller                                 No. 03-5167

   While the undue hardship requirement applies to any                       seeking or obtaining stable employment commensurate with
discharge of student loan indebtedness, the bankruptcy code                  his educational background and abilities.” Id. at 1149-50.
itself does not define “undue hardship.” As a result, this court
has looked to the test enunciated by the Second Circuit in                      In considering whether to discharge Miller’s student loans,
Brunner v. New York State Higher Education Services Corp.,                   the bankruptcy court first analyzed whether Miller had shown
831 F.2d 395 (2d Cir. 1987), to decide if a debtor has made                  by a preponderance of the evidence that she satisfied all three
the requisite showing of undue hardship. See, e.g., Hornsby,                 Brunner factors. The court found that Miller did not satisfy
144 F.3d at 437-38; Rice v. United States (In re Rice), 78 F.3d              the second and third factors of the Brunner test. According
1144, 1149-50 (6th Cir. 1996). The Brunner test requires a                   to the bankruptcy court, Miller did not show that her financial
three-part showing by the debtor:                                            situation was more than temporary because she is intelligent
                                                                             and well-spoken, albeit underemployed. The court also
  (1) that the debtor cannot maintain, based on current                      concluded that Miller had not satisfied Brunner’s good faith
  income and expenses, a “minimal” standard of living for                    prong because in the five years since she had left school, she
  herself and her dependents if forced to repay the loans;                   had contributed only $368.00 towards repayment of her
  (2) that additional circumstances exist indicating that this               student loans, which totaled almost $90,000, while using such
  state of affairs is likely to persist for a significant portion            “non-essentials” as personal internet service, long distance
  of the repayment period of the student loans; and                          telephone service, cell phone service, and cable television.
  (3) that the debtor has made good faith efforts to repay
  the loans.                                                                   Despite not meeting the Brunner factors for undue
                                                                             hardship, the court relied on its “§ 105(a) powers” to partially
Brunner, 831 F.2d at 396. This court, however, has not                       discharge her student loans:
formally adopted the Brunner test and may look to other
factors, including “the amount of the debt . . . [and] the rate                The Debtor, for the most part, leads a modest lifestyle.
at which interest is accruing” as well as “the debtor’s claimed                PHEAA’s sought-after reduction of the Debtor’s phone
expenses and current standard of living, with a view toward                    expenses and the total elimination of her cable and
ascertaining whether the debtor has attempted to minimize the                  internet services would barely generate a third of the
expenses of himself and his dependents.” Hornsby, 144 F.3d                     funds necessary to meet even the most basic loan
at 437 (quoting Rice, 78 F.3d at 1149) (first alteration in                    consolidation schedule.        Further, earnings from
original).2 In addition, “the debtor’s income, earning ability,                additional hours worked at the Debtor’s second job are
health, educational background, dependents, age, accumulated                   not a permanent solution to this dilemma. The court will
wealth, and professional degree” may also be considered.                       not require the Debtor to work 56 hours per week for the
Rice, 78 F.3d at 1149. Finally, a court may inquire into                       next 25 years in order to repay her student loans. To do
“whether the debtor has attempted to maximize his income by                    so would make her a slave to the loans and would
                                                                               deprive her of any future hope for financial
                                                                               independence. The court also cannot place total reliance
                                                                               on the funds freed up by the discharge of the Debtor’s
    2
     As we noted in Hornsby, Rice concerned the standard governing             credit card bills. Those funds, while substantial, are
discharge of Health Education Assistance Loans, but these factors are          partially offset by automobile payments and the
nonetheless relevant to evaluate the discharge o f ordinary student loans.
Hornsby, 144 F.3d at 437 n.7.
No. 03-5167                                 In re Miller   13

  inevitable maintenance and replacement costs associated
  with an older used car.
Consequently, when determining whether Miller’s student
loans should be partially discharged, the court did not apply
the Brunner factors, or any other factors relied upon by this
court in making a finding of undue hardship, but rather
constructed its own framework for granting a partial
discharge.
  In so doing, the bankruptcy court impermissibly used its
equitable authority. Section 523(a)(8) permits the discharge
of student loans only upon a finding that denying such
discharge would impose undue hardship on the debtor.
11 U.S.C. § 523(a)(8). Relying on § 105 to discharge student
loan indebtedness for reasons other than undue hardship
impermissibly contravenes the express language of the
bankruptcy code. See Ray v. City Bank & Trust Co. (In re C-
L Cartage Co.), 899 F.2d 1490, 1494 (6th Cir. 1990)
(“Bankruptcy courts . . . cannot use equitable principles to
disregard unambiguous statutory language.”). Therefore,
because we do not read Hornsby as rejecting the idea that the
undue hardship requirement of § 523(a)(8) must be satisfied
with the grant of a partial discharge, and because we believe
that § 523(a)(8) must apply to all discharges of student loan
debt, we remand this case so that the bankruptcy court can
determine if Miller has shown undue hardship with respect to
the portion of her educational loans that were discharged.
                             III.
  For the foregoing reasons, we reverse the decision of the
district court affirming the order of the bankruptcy court and
remand this case to the district court with instructions to
remand to the bankruptcy court for proceedings consistent
with this opinion.
