                          RECOMMENDED FOR FULL-TEXT PUBLICATION

                                     File Name: 18b0010p.06

                     BANKRUPTCY APPELLATE PANEL
                                  OF THE SIXTH CIRCUIT



 IN RE: CORY LAMON CHENAULT,                             ┐
                                       Debtor.           │
  ___________________________________________            │
                                                         │
 CORY LAMON CHENAULT,                                    │
                                  Plaintiff-Appellant,   >     No. 18-8003
                                                         │
        v.                                               │
                                                         │
 GREAT LAKES HIGHER EDUCATION CORPORATION,               │
                                                         │
                                    Defendant,
                                                         │
                                                         │
 UNITED STATES DEPARTMENT OF EDUCATION,                  │
                    Intervenor Defendant-Appellee.       │
                                                         ┘

                          Appeal from the United States Bankruptcy Court
                         for the Eastern District of Kentucky at Lexington.
                          No. 17-51449—Gregory R. Schaaf, Judge.

                               Decided and Filed: July 5, 2018

    Before: BUCHANAN, DALES, and OPPERMAN, Bankruptcy Appellate Panel Judges.

                                     _________________

                                         COUNSEL

ON BRIEF: Charles P. Wisdom, Jr., Callie R. Owen, UNITED STATES ATTORNEY’S
OFFICE, Lexington, Kentucky, for Appellee. Cory Lamon Chenault, Lexington, Kentucky,
pro se.
                                     _________________

                                          OPINION
                                     _________________

       SCOTT W. DALES, Bankruptcy Appellate Panel Judge. In this appeal, Cory Lamon
Chenault (the “Debtor”) asks this Panel to overturn the bankruptcy court’s order dismissing his
 No. 18-8003                             In re Chenault                                   Page 2


adversary complaint for failure to state a cause of action. The Panel concludes that the Debtor
did not plead sufficient facts to support a discharge of his student loan debt notwithstanding the
exception to discharge that would otherwise apply under 11 U.S.C. § 523(a)(8). Accordingly,
the order of the bankruptcy court is AFFIRMED.

                                     ISSUE ON APPEAL

       The sole issue on appeal is whether the bankruptcy court improperly dismissed Debtor’s
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”) made
applicable in adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b).

                       JURISDICTION AND STANDARD OF REVIEW

       The United States District Court for the Eastern District of Kentucky has authorized
appeals to the Panel, and no party has timely elected to have this appeal heard by the district
court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as
of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order “ends the
litigation on the merits and leaves nothing for the court to do but execute the judgment.”
Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989)
(citations omitted). “An order dismissing an adversary complaint under Fed. R. Civ. P. 12(b)(6)
is a final order.” Maxus Capital Grp., LLC v. Uhrich (In re Level Propane Gases, Inc.), No. 09-
8047, 2010 WL 1255669, at *2 (B.A.P. 6th Cir. Apr. 2, 2010) (citing Kaye v. Agripool, SRL (In
re Murray, Inc.), 392 B.R. 288, 292 (B.A.P. 6th Cir. 2008)).

       “A bankruptcy court’s order dismissing a complaint for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6) is reviewed de novo.” Lefkowitz v. Mich. Trucking,
LLC (In re Gainey Corp.), No. 11-8038, 2012 WL 3938521, *1 (B.A.P. 6th Cir. Sept. 11, 2012).
“Under a de novo standard of review, the reviewing court decides an issue independently of, and
without deference to, the trial court’s determination.” Level Propane Gases, 2010 WL 1255669,
at *2 (citation omitted).
 No. 18-8003                               In re Chenault                                    Page 3


                                              FACTS

       In July 2017, Debtor filed a chapter 7 bankruptcy petition. A month later, he filed an
adversary complaint seeking the discharge of his student loan debt as an “undue hardship”
pursuant to § 523(a)(8). Debtor incurred the debt to finance his education at Spencerian College
in Lexington, Kentucky. He graduated with an architectural drafting certification in May 2008.
He asserts that since the time of graduation the loan has been in forbearance, deferment or an
income-driven repayment plan.

       The United States Department of Education (the “DOE”) filed a Motion to Intervene as a
Party-Defendant on September 27, 2017, which was granted on October 20, 2017.                     On
November 3, 2017, the DOE filed a Motion to Dismiss, or in the alternative for Summary
Judgment. On November 13, 2017, the Debtor filed an objection to the motion, not refuting the
facts alleged in the motion, but arguing undue delay.

       Following a hearing on November 16, 2017, the bankruptcy court entered an order
allowing the Debtor fourteen days to amend his original complaint.              On the record, the
bankruptcy court explained that the Debtor’s original complaint did not state sufficient facts to
plausibly allege that he could meet the second prong of the Brunner test. Under this prong, the
Debtor is required to plead “that additional circumstances exist indicating that this state of affairs
is likely to persist for a significant portion of the repayment period of the student loans.”
Brunner v. New York State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2d Cir. 1987). The
Debtor filed an amended complaint on November 22, 2017. The amended complaint attached
exhibits showing proof of the Debtor’s status as a parolee, but did not otherwise correct the
deficiencies the bankruptcy court earlier called to his attention.

       On December 6, 2017, the DOE filed a second Motion to Dismiss Adversary Proceeding.
The bankruptcy court held a hearing on January 18, 2018. The next day, it entered an order
granting the DOE’s motion to dismiss finding that the Debtor “only [made] conclusory
statements about his inability to pay, without offering facts that may support these conclusions.”
(Order at 1, Adv. P. 17-05015 ECF No. 31.) Moreover, the bankruptcy court held that the
Debtor’s status as a parolee, alone, was not sufficient to state a cause of action because such
 No. 18-8003                              In re Chenault                                     Page 4


status was not “beyond the debtor’s control” as required under the third prong of the Brunner
test. (Order at 2.); see Elebrashy v. Student Loan Corp. (In re Elebrashy), 189 B.R. 922, 928
(Bankr. N.D. Ohio 1995) (a good faith effort to repay encompasses the notion that the debtor’s
situation must result from “factors beyond his reasonable control”).

                                          DISCUSSION

       Student loan debt is not discharged in bankruptcy pursuant to § 523(a)(8) of the
Bankruptcy Code, unless excepting the debt from discharge “would impose an undue hardship
on the debtor and the debtor’s dependents[.]” The Sixth Circuit Court of Appeals, along with the
majority of courts, apply the test articulated in Brunner to determine whether an undue hardship
exists. See Oyler v. Educ. Credit Mgmt. Corp. (In re Oyler), 397 F.3d 382, 385 (6th Cir. 2005)
(adopting Brunner test in the Sixth Circuit). The Brunner test requires a debtor to establish three
elements to qualify for discharge of educational loans on the basis of undue hardship. The
elements are:

       (1) that the debtor 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 period of the student
       loans; and (3) that the debtor has made good faith efforts to repay the loans.

Brunner, 831 F.2d at 396. “It is the debtor’s burden to establish the existence of each of these
elements by a preponderance of the evidence.” Trudel v. U.S. Dep’t of Educ. (In re Trudel),
514 B.R. 219, 226 (B.A.P. 6th Cir. 2014) (citations omitted). At the pleading stage, a plaintiff’s
allegations must show that a right to relief is plausible. Bell Atl. Corp. v. Twombly, 550 U.S.
544, 561, 127 S. Ct. 1955, 1968 (2007).

       Accordingly, to survive the DOE’s motion to dismiss the complaint under Rule 12(b)(6),
the Debtor was required to state sufficient facts which, when taken as true, could plausibly
establish each of these elements. The Debtor failed to do so.

                                                 I.

       The Debtor first argues that the bankruptcy court erred by not requiring the creditor to
bear the initial burden of establishing that the debt is of the type excepted from discharge under
 No. 18-8003                                    In re Chenault                                         Page 5


§ 523(a)(8). The Sixth Circuit has not explicitly stated that the creditor bears the initial burden
of proof to establish that § 523(a)(8) is applicable. However, if it were to do so, a creditor would
need to show that the debt is for:

        (A)     (i) an educational benefit overpayment or loan made, insured, or
        guaranteed by a governmental unit, or made under any program funded in whole
        or in part by a governmental unit or nonprofit institution; or
               (ii) an obligation to repay funds received as an educational benefit,
        scholarship, or stipend; or
        (B) any other educational loan that is a qualified education loan, as defined in
        section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who
        is an individual[.]

11 U.S.C. § 523(a)(8).

        In the present case, the Debtor stated in his original complaint that the debt is student
loan debt. (Complaint at ¶ 3, Adv. P. 17-05015 ECF No. 1.) Additionally, the Debtor stated that
the debt is serviced by Great Lakes Higher Education Corporation, the named defendant, 1 and
that the loan was incurred to pay expenses at Spencerian College. (Id. at ¶¶ 4,5.) Accordingly,
regardless of whether the DOE or the Debtor bears the burden of proving that the debt is of the
type included in § 523(a)(8), the Debtor’s own pleading removed the issue from contention, and
his own allegations plausibly support the allegation that the nature of the debt at issue places it
within the exception.

                                                       II.

        Secondly, the Debtor argues that the duration of his parole, which allegedly extends
beyond the repayment period, creates an undue hardship. He asserts that despite his post-parole
education, he is unable to obtain regular employment and maintain a minimal standard of living
while caring for his dependents. He asserts that this state of affairs will likely persist throughout
the repayment period.




         1The DOE is the holder of Debtor’s student loans. (Certificate of Indebtedness, Adv. P. 17-05015 ECF No.
11, Exh. 1.)
 No. 18-8003                               In re Chenault                                    Page 6


       At issue in this appeal is whether the Debtor alleged sufficient facts in his complaint to
avoid dismissal under Rule 12(b)(6). When considering whether to dismiss a complaint under
Rule 12(b)(6), “[t]he court must construe the complaint in the light most favorable to the
plaintiff, accept all the factual allegations as true, and determine whether the plaintiff can prove
a set of facts in support of its claims that would entitle it to relief.” Bovee v. Coopers &
Lybrand C.P.A., 272 F.3d 356, 360 (6th Cir. 2001). A court should only dismiss a complaint
under Rule 12(b)(6) when “it appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief.” Twombly, 550 U.S. at 561, 127
S. Ct. at 1968 (citing Conley v. Gibson, 355 U.S. 41, 45–46, 78 S. Ct. 99, 102 (1957)).
Nevertheless, “a court is not required to accept as true unwarranted legal conclusions and/or
factual allegations.” Level Propane Gases, 2010 WL 1255669, at *2 (quoting Harvey v. Great
Seneca Fin. Corp., 453 F.3d 324, 327 (6th Cir. 2006) (citation omitted)).

       The bankruptcy court found that the Debtor did not adequately support his assertion of
undue hardship, and thus, did not meet his pleading burden. The Panel reviews the bankruptcy
court’s determination de novo and reaches the same result.

       The Bankruptcy Code does not provide a specific list of “additional
       circumstances” to be considered to indicate the persistence of a debtor’s state of
       affairs. “Such circumstances must be indicative of a ‘certainty of hopelessness,
       not merely a present inability to fulfill financial commitment.’ They may include
       illness, disability, a lack of useable job skills, or the existence of a large number
       of dependents. And, most importantly, they must be beyond the debtor’s
       control, not borne of free choice.

Looper v. U.S. Dep’t of Educ. (In re Looper), No. 05-38187, 2007 WL 1231700, at *6 (Bankr.
E.D. Tenn. Apr. 25, 2007) (emphasis added).

       The only “circumstances” the Debtor submitted to the bankruptcy court was proof of the
terms of his parole. He did not make any assertions regarding his current income, his job search
activity or his likelihood of success in the future. Nor did he allege that he had availed himself
of any job search assistance or employment programs available to parolees. Rather, the Debtor
simply made the conclusory argument that because he will be on parole throughout the
repayment period, he has an undue hardship.
 No. 18-8003                               In re Chenault                                    Page 7


        Moreover, as other courts have held, status as a parolee may not meet the additional
circumstances required for another reason. The Debtor’s circumstance as a parolee is of his own
making.

        While the Debtor’s earning potential is decidedly limited by his incarceration, his
        current and future state of financial affairs is directly attributable to his actions,
        and he cannot escape the responsibility therefor. Accordingly, based upon
        evidence presented, the court finds that the Debtor has not met his burden of proof
        with respect to the second Brunner/Oyler factor because the Debtor’s financial
        circumstances are the direct result of his actions.

Looper, 2007 WL 1231700, at *7. Likewise, in Ebelsheiser v. Coll. Assist (In re Ebelsheiser),
543 B.R. 1, 6 (Bankr. S.D. Iowa 2015), the bankruptcy court found that the debtor’s parole
conditions “exist solely because of his conduct and the consequences of his convictions.” Thus,
the bankruptcy court held that they were self-imposed and did “not warrant a finding of undue
hardship.” Id.

        This Panel finds the Debtor’s assertion that his status as a parolee creates an undue
hardship, by itself, is simply not enough to overcome a motion to dismiss under Rule 12(b)(6).
Debtor did not articulate facts to support an allegation that his past criminal behavior has made it
unlikely that he will find adequate employment in the future. Additionally, even if he did, his
condition is one of his own making and does not qualify as the “additional circumstances”
required by the second and third prongs of the Brunner test.

                                                 III.

        Finally, the Debtor argues that the bankruptcy court should not have applied the Brunner
test.   He says that requiring a debtor to show the existence of unique or extraordinary
circumstances amounting to a certainty of hopelessness is not supported by the text of
§ 523(a)(8). He states that a better, more reasonable test can be found in the First and Eighth
Circuits in the form of a “totality of the circumstances test.” See Long v. Educ. Credit Mgmt.
Corp. (In re Long), 322 F.3d 549, 553 (8th Cir. 2003); Bronsdon v. Educ. Credit Mgmt. Corp.
(In re Bronsdon), 435 B.R. 791, 801 (B.A.P. 1st Cir. 2010). Nevertheless, the Sixth Circuit
Court of Appeals has adopted the Brunner test, not a totality of the circumstances test. See
Oyler, 397 F.3d at 385. Even assuming the time has come to revisit Brunner, unless and until the
 No. 18-8003                              In re Chenault                                    Page 8


Sixth Circuit Court of Appeals does so, the bankruptcy courts in this circuit, as well as this Panel,
are obligated to apply it. Thus, in reviewing whether a complaint states a cause of action under
§ 523(a)(8), it is appropriate and necessary for a bankruptcy court to determine whether a debtor
has stated sufficient facts to establish each element of the Brunner test and in this case, the Panel
concludes that the Debtor has not.

                                         CONCLUSION

       The order dismissing the case is AFFIRMED.
