Type: Amicus
Date: January 29, 2021
Description: What is the proper test for determining undue hardship for the discharge of student loans.
Result: Petition denied, June 21, 2021.
Court Applies Purpose Test to Private Student Loan Discharge Case
Private loans extended to pay the debtor’s “costs of attendance” at the University of Michigan and which, taken in conjunction with the debtor’s Pell Grants, did not exceed the debtor’s education expenses, fell within section 523(a)(8)(B)’s exception to discharge. MacEwan Conti v. Arrowood Indemnity Co., No. 20-1172 (6th Cir. Dec. 14, 2020). [Read more…] about Court Applies Purpose Test to Private Student Loan Discharge Case
Med School Loans Partially Discharged after Debtor Fails to Match for Residency
Finding that the debtor’s string of very bad luck unrelieved by his concerted efforts to increase his earnings, satisfied the Brunner test, a bankruptcy court granted him a partial discharge of his student loan, reducing the debt from $440,000 to $8,291.67. Koeut v. U.S. Dept. of Ed., No. 12-7242, Adv. Proc. No. 18-90130 (Bankr. S.D. Cal. Dec. 4, 2020). [Read more…] about Med School Loans Partially Discharged after Debtor Fails to Match for Residency
Sanctions Against Student Loan Servicer
A student loan servicing company’s failure, over the course of five years, to respond to an adversary complaint and multiple court orders justified a finding of contempt and sanctions against the servicer, requiring it to pay off the debtor’s student loans to the DOE for $354,629.62 and pay damages to the debtor for $24,000. Leary v. Great Lakes Educational Loan Services, No. 15-11583, Adv. Proc. No. 15-1295 (Bankr. S.D.N.Y. Sept. 8, 2020).
10th Circuit – Student Loan Not Excepted from Discharge as Educational Benefit
An educational benefit is not a student loan for nondischargeability purposes under section 523(a)(8)(A)(ii). McDaniel v. Navient Solutions, LLC, No. 18-1445 (10th Cir. Aug. 31, 2020).
When the debtors filed their Chapter 13 petition, they had many outstanding student loans, including six private educational loans held by Navient totaling approximately $107,000 (the Loan). The trustee objected to confirmation of the plan, citing its failure to provide for nondischargeable student loans. The debtors filed an amended plan specifically to correct certain inaccuracies not related to student loans. They also added the provision that “[s]tudent loans are to be treated as an unsecured Class Four claim or as follows: deferred until the end of the plan.” The plan defined unsecured Class Four claims as “[a]llowed unsecured claims not otherwise referred to in the Plan.” Navient agreed that class four claims were dischargeable. [Read more…] about 10th Circuit – Student Loan Not Excepted from Discharge as Educational Benefit
Loan to Refinance Student Loan Need Not Be Educational Loan to be Nondischargeable
A debt incurred when a debtor refinances a student loan through a non-institutional lender may be nondischargeable in bankruptcy without regard to whether the debt itself constituted a qualified educational loan. Juber v. Conklin (In re Conklin), No. 19-91 (W.D. N.C. Apr. 6, 2020).
The debtor, Lina Conklin, financed her college education, in part, through private student loans. After she graduated, Ms. Conklin became engaged to the creditors’ son, Christopher Juber. At that time, she owed over $100,000 in private student loans at an interest rate of 9.5%. In an effort to assist the as-yet-unmarried couple financially, Christopher Juber’s parents, Kevin and Linda Juber, paid off Ms. Conklin’s student loans using their home equity line of credit (HELOC) at an interest rate of 1.99%. In exchange, Ms. Conklin orally agreed to make biweekly payments to the Jubers of $500, and, when the Jubers sold their home, Ms. Conklin agreed that she and their son would refinance the remaining principal on the HELOC loan. When Ms. Conklin later broke off her engagement with their son, the Jubers and Ms. Conklin entered into a promissory note under which Ms. Conklin agreed to repay the loan over ten years at 9.5% interest. [Read more…] about Loan to Refinance Student Loan Need Not Be Educational Loan to be Nondischargeable
District Court Refuses to Dismiss FCRA Class Action Lawsuit For Negligent Incorrect Credit Reporting On Discharged Student Loan Subtitle: Court finds CRA’s failure to have a procedure in place to distinguish which student loans are discharged is negligence.
Before filing for bankruptcy, the Debtor incurred a student loan (ultimately held by Navient) to attend the Reformed Theological Seminary. The seminary was not a Title IV-accredited institution.
The Debtor filed for bankruptcy, listed this loan, and received an order of discharge. Both Navient and Experian Information Solutions LLC. (“Experian”) Received notice of the discharge order. Experian prepared the Debtor’s credit report and described the Navient Loan as “account charged off,” with an outstanding balance and a past due balance.
On April 29, 2019, the Debtor filed a Complaint against Experian in the District Court for the Southern District of New York, alleging violations of the Fair Credit Reporting Act (“FCRA”) found at 15 U.S.C. § 1681 et seq and the New York Fair Credit Reporting Act (“NY FCRA”), which has similar provisions. The Debtor claimed that Experian negligently (Count I) and intentionally (Count II) violated 15 U.S.C. § 1681e(b) and the companion New York statutes (Counts III and IV).
15 U.S.C. § 1681e(b) states
Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.
The Complaint pled that Experian prepared Debtor’s credit report with an inaccuracy in that Debtor’s debt with Navient should have been reported as discharged in his bankruptcy. This is because the loan was for a non-Title IV school and therefore was not subject to the exceptions to discharge found at 11 U.S.C. § 523(a)(8)(B).
Experian filed a motion to dismiss. Experian first argued that the Complaint pled only a dispute about the legal effect of the discharge, not a factual inaccuracy. The Court disagreed.
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Munch v. Educ. Credit Mgmt Corp., No. 18-56300 (9th Cir.)
Type: Amicus
Date: December 3, 2019
Description: Whether court misapplied the Brunner elements when addressing undue hardship in student loan case, and whether Brunner is outdated.
Result: Pending
NCBRC Seeks to Intervene in Student Loan Case and Unseal TERI Documents.
NCBRC filed a motion to unseal documents in the chapter 7 case of Mata v. National Collegiate Student Loan Trust 2006-1, et al., No. 16-30625, Adv. Proc. No. 18-1089 (Bankr. C.D. Cal.) (motion filed Nov. 15, 2019).
In the underlying adversary proceeding filed by the debtor seeking to discharge student loans, the defendant student loan securitization trusts moved for summary judgment arguing that the loans were nondischargeable under section 523(a)(8)(A)(i), which excepts from discharge “an educational benefit overpayment or loan made, insured, or guaranteed by a . . . nonprofit institution.” The trusts argued that, although they were not non-profit organizations, the loans “were made under a program funded, in whole or in part, by [TERI] a non-profit institution.”
NCBRC’s motion seeks to “unseal (1) two student loan guaranty agreements between National Collegiate Student Loan Trust 2006-1, National Collegiate Student Loan Trust 2006-4, and National Collegiate Student Loan Trust 2007-4, on the one hand, and the now-defunct The Education Resources Institute, Inc. (“TERI”), . . . and (2) two unredacted pleadings that rely on the Guaranty Agreements.” [Read more…] about NCBRC Seeks to Intervene in Student Loan Case and Unseal TERI Documents.
Bankruptcy Court May Not Enforce Discharge Order from Other District
On direct interlocutory appeal, the Fifth Circuit found that courts may not use their contempt powers to enforce discharge orders issued by other courts outside their judicial districts. The court also held that the private student loans at issue were not subject to section 523(a)(8)(A)(ii)’s nondischargeability provision because that provision applies only to educational benefits where, as in the case of grants or scholarships, the obligation to repay is conditional. Crocker v. Navient Solutions LLC, No. 18-20254 (5th Cir. Oct. 22, 2019). [Read more…] about Bankruptcy Court May Not Enforce Discharge Order from Other District