Posted by NCBRC - March 13th, 2019
Finding that “non-dischargeability does not immunize the student loan claim from modification,” the bankruptcy court confirmed the chapter 12 debtors’ plan under which their payments would go to the principal on their student loan debt with accumulated post-petition interest to be paid post-discharge. In re Duensing, No. 18-10201 (Bankr. D. Kans. Feb. 22, 2019).
ECMC objected to Kirk and Eve Duensing’s proposed treatment of Ms. Duensing’s student loan debt arguing that, because the reduction of principal would result in declining post-petition interest, the proposed plan effectively discharged her student loan without a finding of undue hardship. Read More
Posted by NCBRC - February 18th, 2019
An agreement establishing a tuition payment deadline was not a lending agreement and therefore, the debt created by the debtor’s failure to pay her summer tuition did not constitute a non-dischargeable student loan under section 523(a)(8). Hazelton v. UW-Stout, No. 18-159 (W.D. Wisc. Feb. 1, 2019).
In order to attend classes at UW-Stout, Kelly Hazelton signed an “Email Authorization/Payment Plan Agreement” which provided that she pay for summer classes in full by the end of the first week of class. Ms. Hazelton failed to pay for her 2015 summer classes but finished all the course work necessary to satisfy the requirements for her degree. She and her husband filed for chapter 7 bankruptcy and received a discharge, but despite knowing of the bankruptcy, UW-Stout refused to issue her degree. It also garnished her 2016 tax refund. The Hazeltons filed an adversary complaint seeking sanctions for violation of the discharge injunction, but the bankruptcy court found the debt was a student loan that was excepted from discharge under section 523(a)(8). Read More
Posted by NCBRC - December 13th, 2018
An arbitration clause in a student loan contract is unenforceable where the debtor seeks an order of discharge of the loan in bankruptcy. Roth v. Butler University (In re Roth), No. 17-4109, Adv. Proc. No. 18-50097 (Bankr. S.D. Ind. Nov. 16, 2018).
After Matthew Roth obtained his chapter 7 discharge, he moved to reopen his bankruptcy to seek discharge of his student loans under section 523(a)(8). One of his student loan lenders, Sallie Mae, answered with a motion to compel arbitration based on the terms of the student loan agreement. Read More
Posted by NCBRC - December 7th, 2018
Where evidence of the non-profit entity’s involvement in the debtor’s student loan was minimal, the bankruptcy appellate panel found that the lender should not have been granted summary judgment on the issue of nondischargeability. Page v. JP Morgan Chase Bank, No. 18-6011 (B.A.P. 8th Cir. Nov. 20, 2018).
Richelle Page obtained a loan from Chase Bank through its Education One Undergraduate Loan Program. The loan was then sold to the National Collegiate Student Loan Trust (NCSLT). When she filed for bankruptcy, NCSLT sought a finding that the loan was nondishargeable under section 523(a)(8). The bankruptcy court granted NCSLT’s motion for summary judgment. Read More
Posted by NCBRC - October 9th, 2018
A debtor who exceeds the debt limit specified in section 109(e) is ineligible for chapter 13 bankruptcy regardless of the nature of the debts and, therefore, there is cause for dismissal or conversion. Stearns v. Pratola (In re Pratola), No. 18-213 (N.D. Ill. Aug. 31, 2018).
Christopher Pratola filed a chapter 13 bankruptcy petition listing unsecured debts at less than the debt limit set forth in section 109(e). He later amended his schedules to include an additional federal student loan debt which he was repaying under an IBR at 10%. That loan raised his unsecured debt to above the debt ceiling. Read More
Posted by NCBRC - September 26th, 2018
A private loan in excess of the cost of attendance is not subject to exception from discharge under section 523(a)(8)(A)(ii). McDaniel v. Navient Solutions, No. 09-37450, Adv. Proc. No. 17-1274 (Bankr. D. Colo. Sept. 2018).
In their confirmed chapter 13 plan, Byron and Laura McDaniel treated their student loans, including those held by Navient Solutions, as unsecured Class Four claims to be deferred until after discharge. Upon completion of their plan, the McDaniels obtained discharge, but later moved to reopen. They filed an adversary proceeding seeking a declaration that a particular private loan held by Navient was not excepted from discharge. They also sought a finding that Navient violated the discharge injunction by collecting on that private loan post-discharge. Navient moved to dismiss the adversary proceeding. Read More
Posted by NCBRC - September 7th, 2018
The availability of an income-based repayment program is a factor to be considered in the totality-of-circumstances test for student loan discharge under section 523(a)(8). Kemp v. U.S. Dept. of Ed., No. 17-6032 (B.A.P. 8th Cir. Aug. 24, 2018).
The bankruptcy appellate panel affirmed the bankruptcy court’s denial of discharge of Erin Kemp’s student loans. The bankruptcy court had based its decision, in part, on the availability of an income-based repayment program when determining whether Ms. Kemp could make payments on the loan while maintaining a minimum standard of living. The panel, relying on the Eighth Circuit opinion in Educ. Credit Mgmt. Corp. v. Jesperson (In re Jesperson), 571 F.3d 775 (8th Cir. 2009), found that the existence of a repayment plan offering lower payments than those mandated by the lending agreement, while not dispositive, was a legitimate factor to be considered in the totality-of-circumstances test. Other factors also contributed to the bankruptcy court’s opinion, however, including the facts that Ms. Kemp had a history of successful employment, understated her income and overstated her expenses, was 36 years-old-at the time of her bankruptcy and could obtain better employment but chose not to in order to maintain a flexible part-time work schedule. As to her claim that she suffered from anxiety and depression, the court did not doubt her testimony but found insufficient evidence that those issues prevented full employment. Read More
Posted by NCBRC - August 29th, 2018
After extensive review of the evidentiary record, the court, applying a “totality of the circumstances” test, found that the debtor failed to establish past and future inability to pay his consolidated student loans and denied discharge. Golliday v. ECMC, No. 16-20014, Adv. Proc. No. 16-2028 (Bankr. D. Me. July 12, 2018).
In 2016, Gregory Golliday filed for chapter 7 bankruptcy seeking to discharge over $200,000 in student loan debt and accumulated interest under section 523(a)(8). After a hearing, the court applied a totality-of-circumstances test in which, in order to show undue hardship, a debtor must “prove by a preponderance of the evidence that (1) . . . his past, present, and reasonably reliable future financial resources; (2) . . . his and . . .[his] dependents’ reasonably necessary living expenses; and (3) other relevant facts and circumstances unique to the case, prevent [him] from paying the student loans in question while still maintaining a minimal standard of living . . .” Read More
Posted by NCBRC - June 22nd, 2018
The chapter 7 trustee could not avoid transfers of PLUS Loan funds to the University where the debtors’ daughter was enrolled because the debtors, who applied for and obtained the loans, had no property interest in the funds. Roumeliotis v. Johnson & Wales University (In re DeMauro), No. 14-32312, Adv. Proc. No. 15-3011 (Bankr. D. Conn. June 19, 2018).
The chapter 7 trustee, George Roumeliotis, sought to avoid eight payments totalling $46,909.00 made to Johnson & Wales University for debtors, Robert and Jean DeMauro’s, adult daughter’s tuition and education expenses. All of the payments consisted of Federal Direct Parent PLUS Loan proceeds under the program established by the Higher Education Act and administered by the U.S. Department of Education. Pursuant to regulations, once the DeMauro’s were approved for the loan, the PLUS loan funds were deposited in a “G5 Portal” and the University withdrew the funds as they became due. The DeMauros had no access to the funds at any time and, in fact, swore to use the funds only for their daughter’s education expenses as a condition of receipt of the loan. Any unauthorized use of the funds would subject the DeMauros to criminal prosecution. Read More
Posted by NCBRC - June 5th, 2018
Money need not change hands for a deferred tuition payment plan to be a “loan,” for purposes of nondischargeability under section 523(a)(8). In re Hazelton, No.16-12372 (Bankr. W.D. Wisc. Feb. 23, 2018).
Ms. Hazelton enrolled at the University of Wisconsin, Stout, and entered into a Payment Plan which deferred her tuition payments until the end of the first week of classes. She completed her degree requirements but did not pay the tuition according to the Payment Plan. Stout withheld her degree pending payment of her tuition and intercepted her state tax return. Ms. Hazelton and her husband obtained a chapter 7 discharge and sought sanctions against Stout for its collection efforts, arguing that the tuition deferment did not constitute a student loan and that the debt was therefore discharged in chapter 7 along with her other debts. Read More
