476 B.R. 463
W.D. Pa.2012Background
- FDCPA and related state-law claims against EduCap and counsel for alleged harassment over a discharged debt.
- EduCap is a Virginia nonprofit that administers education loan programs and partners with lenders under a General Services Agreement (GSA).
- EduCap disburses funds, services loans, and pays the lender when a borrower defaults; Bank of America funded the original loan at issue.
- Decker signed a July 2006 education loan agreement stating the loan is not dischargeable in bankruptcy except under 11 U.S.C. §523(a)(8).
- In 2010 EduCap paid Bank of America the full amount and acquired the loan rights; a default judgment followed in 2011; Decker filed this FDCPA/UTPCPL/tort action, which was removed to federal court.
- The court granted summary judgment for EduCap and Davis Davis Attorneys, holding the loan was excepted from discharge under §523(a)(8)(A)(i), thus defeating all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the loan was discharged under §523(a)(8). | Decker argues the program was not funded by a nonprofit, so the loan should not be exempt. | EduCap argues the program was funded/partly funded by a nonprofit actor (EduCap) and thus exempt. | Yes; loan exempt under §523(a)(8)(A)(i). |
| Whether the claims fail because the debt was discharged. | Claims survive if the debt were discharged. | Discharge exemption bars the FDCPA/UTPCPL/tort claims. | Claims fail because the debt was properly exempt from discharge. |
| Whether summary judgment should be granted against both EduCap and Davis Davis Attorneys. | Opposed only with respect to EduCap; no opposition to Davis Davis Attorneys. | Both defendants are entitled to judgment given the discharge issue. | Grant as to both EduCap and Davis Davis Attorneys. |
Key Cases Cited
- In re Merchant, 958 F.2d 738 (6th Cir. 1992) (loan program funded in part by nonprofit institution can be exempt under 523(a)(8))
- In re O’Brien, 419 F.3d 104 (2d Cir. 2005) (nonprofit-funded loan program; nonprofit funding of program supports exemption)
- In re Drumm, 329 B.R. 23 (Bankr. W.D. Pa. 2005) (nonprofit participation in procurement of loan programs supports discharge exemption)
- Santa Fe Medical Services, Inc. v. Segal, 57 F.3d 342 (3d Cir. 1995) (legislative history behind 523(a)(8) and educational-loan discharge policy)