Busson-Sokolik v. Milwaukee School of Engineering, 635 F.3d 261

Busson-Sokolik attended MSOE in 1999–2000; MSOE extended a $3,000 loan evidenced by a promissory note signed October 29, 1999.
The note obligated repayment of funds plus interest and recovery of reasonable collection costs and attorney’s fees.
MSOE obtained a default state-court judgment for unpaid sums in 2005.
Busson-Sokolik filed a Chapter 13 then Chapter 7 bankruptcy; MSOE was listed as a creditor.
Bankruptcy court and district court held the MSOE loan non-dischargeable under 11 U.S.C. § 523(a)(8) and awarded MSOE damages including costs and attorney’s fees.
The district court sanctioned Busson-Sokolik and his attorney; this court affirmed sanctions but reduced the amount by half.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the MSOE loan is non-dischargeable under § 523(a)(8).	Busson-Sokolik argues the loan is not educational.	MSOE contends the loan was educational in purpose.	Yes; the debt is non-dischargeable under § 523(a)(8) as educational.
Whether MSOE could recover collection costs and attorney’s fees under the contract.	MSOE relies on contract to recover fees.	Bankruptcy Code does not prohibit contract-based fees.	Yes; fees awarded under the promissory note contract were permissible.
Whether the merger doctrine argument was waived and/or merits consideration.	Busson-Sokolik argued merger doctrine supported fee reversal.	Merger issue was waived and not properly raised.	Waived; no exception applied to consider merger argument.
Whether the district court abused its discretion in sanctions and the amount.	Appeal was frivolous; sanctions appropriate.	Not frivolous; some errors but not bad faith.	Sanctions affirmed but the amount reduced by half.

In re Murphy, 282 F.3d 868 (5th Cir.2002) (framework for educational loan purpose under § 523(a)(8))
Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443 (U.S. 2007) (contract-based fees are recoverable in bankruptcy when enforceable outside bankruptcy)
In re Chambers, 348 F.3d 650 (7th Cir.2003) (defines loan elements for purpose test)
Wiese v. Cmty. Bank of Cent. Wis., 552 F.3d 584 (7th Cir.2009) (legal standards for bankruptcy code questions and de novo review)
Mungo v. Taylor, 355 F.3d 969 (7th Cir.2004) (support for de novo review of legal questions)
Matter of Weber, 25 F.3d 413 (7th Cir.1994) (waiver concept for issues not raised below)
In re Rimsat, Ltd., 212 F.3d 1039 (7th Cir.2000) (abuse of discretion standard for sanctions in bankruptcy)
Flaherty v. Gas Research Inst., 31 F.3d 451 (7th Cir.1994) (frivolous appeal standard for sanctions)
In re Maloni, 282 B.R. 727 (1st Cir.BAP 2002) (factors for evaluating Fed. R. Bankr.P. 8020 motions)
Dungaree Realty, Inc. v. United States, 30 F.3d 122 (Fed.Cir.1994) (frivolousness and merit in appellate arguments)