                                                        FILED
                      ORDERED PUBLISHED
                                                         JUN 26 2019
                                                     SUSAN M. SPRAUL, CLERK
                                                       U.S. BKCY. APP. PANEL
                                                       OF THE NINTH CIRCUIT


         UNITED STATES BANKRUPTCY APPELLATE PANEL
                   OF THE NINTH CIRCUIT

In re:                                  BAP No.    WW-18-1259-BKuF

PAUL HURLEY,                            Bk. No.    2:16-bk-13155-TWD

                 Debtor.                Adv. No.   2:17-ap-01025-TWD

PAUL HURLEY,

                 Appellant,

v.                                                 OPINION

UNITED STATES OF AMERICA;
ACCESSLEX INSTITUTE dba Access
Group,

                 Appellees.

            Submitted Without Oral Argument on May 23, 2019

                           Filed – June 26, 2019

             Appeal from the United States Bankruptcy Court
                 for the Western District of Washington

         Honorable Timothy W. Dore, Bankruptcy Judge, Presiding
Appearances:         Appellant Paul Hurley pro se on brief; Annette L. Hayes
                     and Pooja Faldu Davé on brief for Appellee the United
                     States of America; Joseph Ward McIntosh of McCarthy &
                     Holthus, LLP on brief for Appellee Accesslex Institute
                     dba Access Group.



Before: BRAND, KURTZ and FARIS, Bankruptcy Judges.

BRAND, Bankruptcy Judge:

                                   INTRODUCTION

       Appellant Paul Hurley appeals a summary judgment order in favor

of the United States and Accesslex Institute, dba Access Group (together,

"Defendants"). The bankruptcy court determined that, given Hurley's legal

background and the nature of his criminal conduct, he was unable to

establish good faith under Brunner1 and therefore was not entitled to a

hardship discharge of his student loans under § 523(a)(8).2 We AFFIRM.




       1
        Brunner v. N.Y. State Higher Educ. Servs. Corp. (In re Brunner), 46 B.R. 752, 756
(S.D.N.Y. 1985), aff'd, 831 F.2d 395, 396 (2d Cir. 1987) (adopted by this circuit in United
Student Aid Funds, Inc. v. Pena (In re Pena), 155 F.3d 1108, 1111-12 (9th Cir. 1998)).
       2
       Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all "Rule" references are to the Federal Rules of
Bankruptcy Procedure, and all "Civil Rule" references are to the Federal Rules of Civil
Procedure.

                                              2
      I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A.    Prepetition events

      Hurley received his law degree in 2004 and his L.L.M. in tax in 2006.

He received federal and private student loans to fund his legal education

and bar examination costs. Hurley was admitted to practice law in the state

of Washington in November 2006 but changed his license to inactive status

in January 2010.

      Hurley has made payments on both his federal and private student

loans. He consolidated his federal student loans in 2010 and entered into an

Income Based Repayment Plan. He has also been diligent in his efforts to

obtain deferments and forbearances. Hurley was not in default on his

student loans at the time he filed for bankruptcy.

      In June 2009, Hurley was hired as a revenue agent for the Internal

Revenue Service. Hurley conducted audits of taxpayers' federal tax returns.

      In July 2015, Hurley began auditing the 2013 and 2014 tax returns for

Have a Heart Compassion Care, Inc., a medical marijuana dispensary.3

Hurley met with Ryan Kunkle, the representative for Have a Heart, on

several occasions to discuss the tax returns. After the men had completed



      3
          The United States alleged in Hurley's criminal case that, just days before he
began his audit of Have a Heart, Hurley had received a letter from his superior stating
that the IRS was proposing to terminate him or otherwise discipline him based on his
unauthorized access of taxpayer data on three occasions in 2014 and his lack of candor
in the investigation of his unauthorized access.

                                           3
the audit process and signed the necessary forms, they went outside to

have a discussion "off the record." As part of that discussion, Hurley told

Kunkle that he had saved Have a Heart over $1 million in taxes. Hurley

then solicited a bribe of $20,000 from Kunkle, which Hurley stated he

needed to help pay his student loan debt. Fearing that Hurley would not

present the signed audit documents to his superiors to complete the matter,

Kunkle agreed to make the payment. Kunkle immediately reported the

incident to law enforcement, who arrested Hurley after Hurley was

recorded accepting two cash payments of $5,000 and $15,000 from Kunkle.

Subsequently, Hurley resigned from the IRS, and he was indicted for

federal offenses in connection with this conduct.

      On May 13, 2016, Hurley was convicted for the crimes of Receiving a

Bribe by a Public Official and Receiving an Illegal Gratuity by a Public

Official, both felonies. He was sentenced to thirty months' imprisonment

and three years' supervised release. Following his conviction, Hurley was

disbarred from the practice of law by order of the Washington Supreme

Court. Hurley was released from prison in June 2018 and is living in a

halfway house in Seattle.

B.    Postpetition events

      Hurley filed a chapter 7 bankruptcy case one month after his

conviction. His debts consist almost entirely of his student loan debt.

Hurley represented that, as of the petition date, his student loan debt


                                      4
totaled approximately $256,000. Hurley was granted a discharge on

September 14, 2016.

      1.     Hurley's § 523(a)(8) complaint

      In February 2017 and while incarcerated, Hurley filed a complaint

against Defendants,4 seeking to discharge his entire student loan debt

under § 523(a)(8). In support of his undue hardship claim, Hurley noted his

conviction, incarceration, disbarment from the practice of law, and

resulting financial circumstances. Hurley stated that due to his disbarment

and felony record, he would be unable to return to his former profession or

be employed at the same income level, even if he could find any

substantive employment following his release. Therefore, requiring him to

pay his student loan debt would impose an undue hardship on him and his

dependents. At the time Hurley sought his hardship discharge, he was 45

years old and had a 3-year-old son. Hurley did not note any medical or

other condition that prevented him from working in the future.

      2.     Defendants' motion for summary judgment

      Defendants moved for summary judgment on Hurley's complaint

("MSJ"). Specifically, Defendants argued that Hurley was unable to satisfy

the third prong of the Brunner test: that the debtor has made good faith

efforts to repay the loans. Defendants argued that, despite Hurley's prior


      4
         Hurley sued additional parties but they were either voluntarily dismissed or a
default judgment was entered against them.

                                           5
efforts to pay and stay current on his student loan debt, his present

financial misfortune was self-imposed: Hurley willfully engaged in

criminal activity that directly resulted in his current financial

circumstances. Defendants argued that Hurley's intentional, egregious

conduct outweighed his prior repayment efforts and prevented him from

establishing good faith under Brunner.

      In opposition, Hurley argued that one past bad act should not be

dispositive of good faith under Brunner as Defendants contended. Instead,

the court should consider present-tense factors which indicate whether or

not a debtor has reasonable control over his or her current situation that

now imposes the undue hardship. Hurley contended that he has no control

over his criminal record, that he has no law license, that he has little

prospect for good employment, and that he has no savings. His present

circumstances were a result of societal factors preventing a felon from ever

gaining employment at an income similar to his or her previous

employment. Hurley said he had submitted more than 40 job applications

since his release, which resulted in only one physical interview and no job

offers.

      3.    The bankruptcy court's ruling on the MSJ

      At the MSJ hearing, Hurley's counsel agreed with the court that there

were no material facts in dispute; the issue was whose interpretation of the

good-faith prong in Brunner was the correct one and whether it could be


                                       6
met on the facts for summary judgment purposes.

      After hearing argument from the parties, the bankruptcy court

announced its oral ruling granting the MSJ, finding that the facts relevant

to the good-faith prong of the Brunner test were not in dispute and that no

reasonable trier of fact could find for Hurley on good faith. Recognizing

that there is no per se rule that past criminal conduct defeats good faith, the

court found that the criminal conduct in this case was "very significant"

and "outweigh[ed]" Hurley's earlier, good-faith efforts to repay his student

loans. Precisely, the court noted that:

      As a lawyer, the Debtor had to know that, if he committed the
      crime that he did, he would lose his ability to practice law. As
      such, the Debtor suffers from both a failure to maximize his
      income and having willfully or negligently caused his financial
      condition.

      The Debtor's financial condition is a direct result of factors that
      were within his reasonable control. His financial condition was
      self-inflicted by his decision to commit a crime that would
      significantly impact his financial situation in a very negative way.
      The Debtor's situation is far more egregious than in some other
      cases within the Ninth Circuit where the debtor was found not to
      meet the good-faith prong for failing to maximize income or to
      take other action within the debtor's reasonable control.

Hr'g Tr. (Sept. 7, 2018) 20:1-15. Hurley timely appealed the bankruptcy

court's later written order.




                                          7
                                   II. JURISDICTION

       The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158(b).5

                                         III. ISSUE

       Did the bankruptcy court err in determining that Hurley could not

establish good faith under Brunner?

                            IV. STANDARD OF REVIEW

       We review de novo the bankruptcy court's summary judgment

ruling. Salven v. Galli (In re Pass), 553 B.R. 749, 756 (9th Cir. BAP 2016).

       We review de novo the bankruptcy court's application of the legal

standard in determining whether a student loan debt is dischargeable as an

undue hardship. Rifino v. United States (In re Rifino), 245 F.3d 1083, 1087 (9th

Cir. 2001). Whether the debtor has satisfied each of the three prongs of the

Brunner test, including the good-faith prong, is a mixed question of law

and fact requiring de novo review. Roth v. Educ. Credit Mgmt. Corp. (In re

Roth), 490 B.R. 908, 916 (9th Cir. BAP 2013). We review the factual

underpinnings of the bankruptcy court's good faith determination for clear


       5
          Although the order on appeal resolved all claims against the remaining two
defendants — the United States and Accesslex — the bankruptcy court did not enter a
separate judgment disposing of the adversary proceeding. The parties also have not
sought entry of a separate judgment despite being given the opportunity to do so.
Therefore, the separate judgment requirement under Rule 7058 has been waived. See
Bankers Tr. Co. v. Mallis, 435 U.S. 381 (1978); Casey v. Albertson's, Inc., 362 F.3d 1254, 1256
(9th Cir. 2004).

                                               8
error, but we review de novo the bankruptcy court's ultimate good faith

conclusion. Id.

                              V. DISCUSSION

A.    Summary judgment standards

      Summary judgment should be granted when there are no genuine

issues of material fact and when the movant is entitled to prevail as a

matter of law. Civil Rule 56(a) (made applicable in adversary proceedings

by Rule 7056). In resolving a summary judgment motion, the court does

not weigh evidence, but rather determines only whether a material factual

dispute remains for trial. Covey v. Hollydale Mobilehome Estates, 116 F.3d 830,

834 (9th Cir. 1997). A material fact is one that, "under the governing

substantive law . . . could affect the outcome of the case." Caneva v. Sun

Cmtys. Operating Ltd. P'ship (In re Caneva), 550 F.3d 755, 760 (9th Cir. 2008).

"A genuine issue of material fact exists when 'the evidence is such that a

reasonable jury could return a verdict for the nonmoving party.'" Id. at 761

(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

      At the hearing on the MSJ, Hurley's counsel conceded that there were

no material facts in dispute and that a trial would not produce any

different testimony than the parties had already presented. Thus, neither

party disputed the bankruptcy court's ability to resolve this matter on

summary judgment.




                                       9
B.     The bankruptcy court did not err in determining that Hurley could
       not establish good faith under Brunner and thus did not err in
       granting the MSJ.

       Generally, student loan obligations are presumed to be excepted from

a debtor's discharge under § 727, unless repaying those loans would

"impose an undue hardship on the debtor and the debtor's dependents."

§ 523(a)(8).6 In Pena, 155 F.3d at 1111-12, the Ninth Circuit adopted the

three-pronged test set forth in Brunner, to determine whether the undue

hardship standard has been met. The burden of proving undue hardship is

on the debtor, and the debtor must prove all three elements before

discharge can be granted. In re Rifino, 245 F.3d at 1087-88. If the debtor does

not satisfy any one of these requirements, the bankruptcy court's inquiry

must end there, with a finding of no dischargeability. Id. at 1088.

       The issue here is whether the bankruptcy court erred in reaching its

       6
        Section 523(a)(8) provides, in relevant part, that a discharge under § 727 does
not discharge an individual debtor from any debt for:

       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 an obligation to repay funds
       received as an educational benefit, scholarship, or stipend, or any other
       educational loan that is a qualified education loan . . . incurred by a debtor who
       is an individual[,] . . . unless excepting such debt from discharge under this
       paragraph would impose an undue hardship on the debtor and the debtor’s
       dependents.

It is undisputed that the student loans at issue are of the kind which § 523(a)(8)
generally excepts from discharge.

                                            10
conclusion on the third Brunner prong: whether the debtor made "good

faith efforts to repay the loans." In re Pena, 155 F.3d at 1111; In re Brunner,

831 F.2d at 396.7 "Good faith is measured by the debtor's efforts to obtain

employment, maximize income, and minimize expenses." In re Roth, 490

B.R. at 917 (quoting Educ. Credit Mgmt. Corp. v. Mason (In re Mason), 464

F.3d 878, 884 (9th Cir. 2006)); Pa. Higher Educ. Assistance Agency v. Birrane

(In re Birrane), 287 B.R. 490, 499 (9th Cir. BAP 2002).

       This Panel has assembled the following list of factors courts have

considered in making a good faith determination:

       (1) whether the debtor has made any payments on the loan prior
       to filing for discharge, although a history of making or not making
       payments is, by itself, not dispositive; (2) whether the debtor has
       sought deferments or forbearances; (3) the timing of the debtor's
       attempt to have the loan discharged; and (4) whether the debtor's
       financial condition resulted from factors beyond her reasonable
       control, as a debtor may not willfully or negligently cause her
       own default.

In re Roth, 490 B.R. at 917 (citations and internal quotation marks omitted).

See also In re Brunner, 46 B.R. at 756 (debtor must make an effort to repay

the loans or show "that the forces preventing repayment are truly beyond


       7
         Under Brunner/Pena, the debtor must also establish: (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; and (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. In re Pena, 155 F.3d at 1111; In re
Brunner, 831 F.2d at 396.

                                               11
his or her reasonable control"). While also not dispositive, another

important "good faith" factor focuses upon the debtor's efforts to negotiate

a repayment plan. In re Roth, 490 B.R. at 917 (citing In re Birrane, 287 B.R. at

499 and Educ. Credit Mgmt. Corp. v. Jorgensen (In re Jorgensen), 479 B.R. 79, 89

& n.4 (9th Cir. BAP 2012)).

      Hurley did many things that a debtor should do to establish good

faith: he consistently made payments on his student loans prior to his

bankruptcy filing; he sought forbearance and hardship deferments prior to

and during his incarceration; he enrolled in an Income Based Repayment

Program; and he has been diligent in his job hunting efforts since his

release from prison. Despite his efforts, however, the bankruptcy court

reasoned that Hurley's financial condition was a result of factors within his

reasonable control. His current condition was self-inflicted by his willful,

criminal conduct, and this outweighed his earlier good-faith efforts of

repayment.

      We agree that the court could consider Hurley's past criminal

conduct in the good faith analysis. Other courts have concluded that a

debtor's future employment limitations or lack of earning potential caused

by the debtor's choice to engage in criminal conduct and subsequent

incarceration were not factors beyond the debtor's reasonable control, and

that such factors can preclude a finding of good faith under Brunner. See

Chenault v. Great Lakes Higher Educ. Corp. (In re Chenault), 586 B.R. 414, 421


                                       12
(6th Cir. BAP 2018) (debtor's past criminal record affecting his ability to

find adequate future employment was a condition of his own making and

would not satisfy the second and third prongs of the Brunner test); Watson

v. Sallie Mae (In re Watson), No. 11-5138, 2012 WL 5360949, at *2-3 (Bankr. D.

Kan. Oct. 30, 2012) (concluding that debtor's inability to repay student

loans due to his felony record and resulting incarceration were factors

within his reasonable control and defeated good faith; these factors also

defeated the second prong of the Brunner test); Looper v. U.S. Dep't of Educ.

(In re Looper), No. 06-3042, 2007 WL 1231700, at *7-8 (Bankr. E.D. Tenn.

Apr. 25, 2007) (holding same; undue hardship discharge request denied).

But see Koll v. U.S. Dep't of Educ. (In re Koll), No. 01-8068, 2002 WL 32001509,

at *5 (Bankr. C.D. Ill. May 3, 2002) (refusing to adopt a bright-line test that

precludes debtors with a criminal conviction from obtaining an undue

hardship discharge when otherwise warranted).

      Hurley argues that his criminal conviction should not serve as a

"categorical bar" to a finding for good faith under Brunner. Although still

an open question in this circuit, we would not endorse a bright-line rule

that a debtor with a criminal past can never establish good faith. However,

we do not think that the bankruptcy court so held. Based on the facts, the

court simply concluded that Hurley's willful criminal behavior tipped the

balance against good faith. While this may be a close call given Hurley's

significant good-faith efforts to repay, we are not able to conclude that the


                                       13
bankruptcy court erred. Hurley is a highly educated and capable person.

More importantly, he was a licensed attorney, who knew or had to know

that his conduct could result not only in a criminal conviction but also the

loss of his license to practice law, and that this would negatively affect his

financial situation. Further, Hurley relied entirely on his conviction,

incarceration, disbarment and felony record as the basis for an undue

hardship discharge. He did not cite any medical or other condition —

something beyond his reasonable control — that was a contributing factor

for his inability to find adequate employment and repay his student loans.

See Harvey v. Educ. Credit Mgmt. Corp. (In re Harvey), No.11–1958, 2013 WL

4478926, at *4 (Bankr. D. Colo. Aug. 20, 2013) (co-debtor wife's medical

condition, not her prior felony conviction, prevented her from seeking

employment to repay student loans).8

      The timing of Hurley's request also weighs against good faith. See In

re Roth, 490 B.R. at 917 (timing of debtor's attempt to have loan discharged

can be considered in good faith analysis). He was still incarcerated at the

time, as were the debtors in Watson and Looper, who were also denied an

undue hardship discharge. See also In re Harvey, 2013 WL 4478926, at *4



      8
        To the extent Hurley argues that the good-faith prong of the Brunner test has
been inappropriately expanded to include consideration of a debtor's past bad conduct,
we are bound by our circuit's adoption of Brunner and the factors that a court may
consider for determining undue hardship, including a debtor's past acts, good or bad.


                                          14
(distinguishing Watson and Looper because co-debtor wife was seeking

undue hardship discharge not while incarcerated but sometime

afterwards). Therefore, while his job prospects appear bleak now, that may

change in the future. He still has nearly twenty years to work before

retiring. Thus, his request for a hardship discharge under § 523(a)(8) seems

premature.

      Hurley also argues that the bankruptcy court erred when it

determined that he failed to maximize his income by losing his ability to

practice law considering that he had an inactive bar license since 2010. We

disagree. Hurley specifically relied on his inability to practice law to

establish good faith under Brunner in his briefing before the bankruptcy

court. Furthermore, Hurley presumably put his license on inactive status in

2010 only because he did not need an active license during his employment

with the IRS. In any case, even an inactive law license gave Hurley an

advantage over other applicants for many jobs and likely could have

supported a higher salary. That advantage is now gone solely because of

his willful conduct. Therefore, the court did not err in determining that

Hurley failed to maximize his income by losing his law license.

      Finally, Hurley argues that the bankruptcy court erred by not

considering that he had been enrolled in an Income Based Repayment

Program. The court explicitly considered this fact. It simply concluded that,

given all of the factors establishing good faith, Hurley could not meet his


                                       15
burden of proof and that no material factual dispute remained for trial.

                            VI. CONCLUSION

     Because Hurley was unable to establish good faith under Brunner for

an undue hardship discharge of his student loans under § 523(a)(8), the

bankruptcy court did not err in granting Defendants summary judgment.

Accordingly, we AFFIRM.




                                     16
