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Revisiting Bankruptcy Discharge of Student Debt by Declaration in a Chapter 13 Plan

By · October 9, 2010 · 2010 Ark. L. Notes 132
In categories: Bankruptcy

In a 2009 CLE at the School of Law, I talked about the Espinosa case from the Ninth Circuit that allowed a Chapter 13 debtor to discharge his student-loan debt by declaring he had undue hardship in his Chapter 13 plan even when there was no indication that the debtor had undue hardship at all. The Ninth Circuit going alone against other circuit courts of appeal held the debtor could do this. This opinion was in the face of the fact that the debtor must prove undue hardship to discharge student debt. I told the attendees at the CLE to tell their clients with student debt to go west to the Ninth Circuit. Not too surprising, the Supreme Court took the case. The Court’s opinion came down March 23rd 2010. In this short Law Notes article I will try to tell you what the Supreme Court said. I should begin by pointing out, Mr. Espinosa did not treat his educational creditor badly as was the case in other cases in which a debtor tried to do this. He had paid back the principle of the student-loan debt. The only part of the debt he discharged by declaration was the interest accumulated on the debt. The educational creditor was going after Mr. Espinosa several years after he obtained his Chapter 13 discharge. Thus he had some equities on his side.

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Flaccus – Revisiting Bankruptcy Discharge of Student Debt – Arkansas Law Notes 2010