Busson-Sokolik v. Milwaukee School of Engineering (In Re Busson-Sokolik)
635 F.3d 261
| 7th Cir. | 2011Background
- Busson-Sokolik, MSOE loan recipient, signed a $3,000 promissory note (Oct 29, 1999) for educational funding; funds deposited to his MSOE student account on Nov 9, 1999; MSOE sued in Wisconsin state court in 2005 and obtained a default judgment; Busson-Sokolik filed Chapter 13 then Chapter 7 (2006); bankruptcy court held the debt non-dischargeable under 11 U.S.C. §523(a)(8) and ordered $16,248.78 including costs/fees; district court denied sanctions against MSOE, granted MSOE costs/fees under Rule 8020, and sanctions against Busson-Sokolik and Prag, which were then appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Dischargeability under §523(a)(8) framework | Busson-Sokolik argues the MSOE loan is dischargeable | MSOE contends the loan is an educational loan non-dischargeable | Non-dischargeable under §523(a)(8)(A)(i) as educational loan |
| Whether the loan qualifies as educational under §523(a)(8)(A)(i) | Loan purpose central to designation as educational | Funds used for education; MSOE is a nonprofit school | Loan is educational under the purpose-driven test |
| Recovery of collection costs and attorney's fees under the promissory note | Fees barred unless statutory basis; contract allows recovery of costs/fees | Contractual fee-shifting valid under Travelers; no bankruptcy-code bar | Fees awarded under contract; no error; merged arguments waived on merger doctrine |
| Sanctions for appealed proceedings and amount | Sanctions warranted due to frivolous appeal | Sanctions excessive or not properly justified; potential waiver issues | Sanctions upheld but reduced by half; not a finding of bad faith; waivers and merger issues discussed |
Key Cases Cited
- In re Chambers, 348 F.3d 650 (7th Cir. 2003) (defines loan elements for dischargeability analysis)
- Murphy, 282 F.3d 868 (5th Cir. 2002) (adopts 'purpose' test for educational loans under §523(a)(8))
- Travelers Cas. & Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443 (2007) (contractual fee-shifting enforceable in bankruptcy unless code says otherwise)
- Matter of Weber, 25 F.3d 413 (7th Cir. 1994) (waiver and exception to waiver in bankruptcy appeals)
- In re Rimsat, Ltd., 212 F.3d 1039 (7th Cir. 2000) (standard for abuse of discretion in sanctions)