596 B.R. 239
Bankr. E.D.N.Y.2019Background
- Debtor Tashanna Golden filed Chapter 7 (filed Feb. 29, 2016); discharge entered Aug. 3, 2016; case later reopened to litigate dischargeability of certain student loans.
- Golden alleges two private "Tuition Answer Loans" (a $7,103 NCT loan and a $9,348 Citibank loan) were direct-to-consumer loans that exceeded Penn Law's cost of attendance and thus were dischargeable under 11 U.S.C. § 523(a)(8).
- Golden accuses lenders/servicers (Firstmark, PHEAA, and several securitization trusts) of continuing collection after notice of discharge, misrepresenting nondischargeability, and accepting payments — asserting declaratory relief and damages/fees for willful discharge violations.
- Defendants moved to dismiss, arguing the complaint fails to identify the loans/acts with required specificity and that the loans are nondischargeable under § 523(a)(8)(A)(i) (nonprofit/government-funded), § 523(a)(8)(A)(ii) (educational benefits/scholarships), or § 523(a)(8)(B) (qualified education loans).
- The bankruptcy court analyzed pleading standards (Twombly/Iqbal; Rule 8, 12(b)(6), and 9(b)), the statutory text and context of § 523(a)(8), and whether the complaint sufficiently pleads notice, discharge, and intent for a discharge-violation claim.
- Ruling: the court denied the motions to dismiss — finding Golden plausibly alleged that the two loans fall outside § 523(a)(8) exceptions and that defendants continued collection after notice, so claims for declaratory relief and discharge-violation damages survive pleading-stage scrutiny.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Golden pleaded a plausible declaratory-judgment claim that the loans were discharged | Golden: the loans were direct-to-consumer and exceeded cost of attendance, so not covered by § 523(a)(8) and were discharged | Defendants: complaint is too vague about which loans and conduct; loans are nondischargeable under § 523(a)(8) | Denied dismissal — complaint plausibly alleges loans are not excepted from discharge |
| Scope of § 523(a)(8)(A)(ii) ("educational benefit, scholarship, stipend") | Golden: phrase covers conditional grants/stipends, not typical consumer loans; Tuition Answer Loans are not within (A)(ii) | PHEAA: (A)(ii) covers broad education-related obligations; loans supporting education are nondischargeable | Court adopts narrower, trending view: (A)(ii) does not sweep in ordinary student loans; defendants did not show dismissal warranted |
| Applicability of § 523(a)(8)(A)(i) (programs funded by nonprofit/government) to NCT loan | Golden: allegations deny that NCT loan was made under a nonprofit-funded program; disputed factual issue | Trusts: loan documents/endorsement suggest TERI funded the loan, making it nondischargeable under (A)(i) | Court: factual dispute exists; (A)(i) not resolvable on motion to dismiss — claim survives |
| Whether discharge-violation/damages claim must be dismissed for lack of clarity or improper procedural form | Golden: adversary proceeding is proper to enforce discharge; she alleged discharge, notice, and willful collection | Defendants: discharge order is not sufficiently clear for contempt; claims should be brought as contempt motion; insufficient specificity under Rules 8/9 | Court: adversary proceeding is permissible; discharge order and notice allegations suffice at pleading stage; dismissal denied |
Key Cases Cited
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (exceptions to discharge construed narrowly)
- Davis v. Michigan Dep't of Treasury, 489 U.S. 803 (1989) (statutory words read in context and with regard to whole scheme)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (two-step Iqbal pleading framework)
- In re O'Brien, 419 F.3d 104 (2d Cir. 2005) (nonprofit involvement can render loan nondischargeable under § 523(a)(8)(A)(i))
- Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004) (Rule 9(b) fraud pleading requirements)
- Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) (fraud pleading elements)