527 B.R. 624
9th Cir. BAP2015Background
- Debtor Tarra Christoff enrolled at Meridian University and received tuition credits (no cash) evidenced by promissory notes for $6,000 (2002) and $5,000 (2003) payable after completion/withdrawal with interest.
- Debtor withdrew in 2009 before completing her dissertation; payments later defaulted and an arbitrator awarded Meridian $5,950 plus interest.
- Debtor filed Chapter 7 in 2013; Meridian sued in an adversary proceeding seeking a § 523(a)(8) determination that the debt is nondischargeable under § 523(a)(8)(A)(ii).
- Meridian conceded §§ 523(a)(8)(A)(i) and (B) did not apply and argued (A)(ii) — “obligation to repay funds received as an educational benefit” — covered the promissory notes/award.
- Bankruptcy court granted summary judgment for Debtor, holding (A)(ii) requires the debtor to have actually received funds (cash), which Christoff did not; Meridian appealed.
- The BAP affirmed, applying plain statutory text, prior Ninth Circuit/BAP precedent, and narrow construction of discharge exceptions to conclude (A)(ii) does not cover mere tuition-credit loans where no funds were advanced.
Issues
| Issue | Plaintiff's Argument (Meridian) | Defendant's Argument (Christoff) | Held |
|---|---|---|---|
| Whether § 523(a)(8)(A)(ii) covers Meridian’s promissory-note debt (tuition credits with no cash advanced) | “Funds received” should be read like “loans” — prior cases treat loans as nondischargeable even when no money changed hands; thus (A)(ii) covers this debt | (A)(ii) is distinct and requires actual funds to have been received; Congress used different language than the loan subsections and meant a separate category | Held for Debtor: (A)(ii) requires actual funds to have been received; tuition-credit promissory notes where no cash was advanced are dischargeable |
Key Cases Cited
- Ohio Univ. v. Hawkins (In re Hawkins), 469 F.3d 1316 (9th Cir.) (construing “obligation to repay funds received” to require that debtor actually received funds)
- McKay v. Ingleson, 558 F.3d 888 (9th Cir.) (treating certain tuition-deferral arrangements as nondischargeable loans even where no cash changed hands)
- In re Johnson, 218 B.R. 449 (8th Cir. BAP) (promissory-note tuition-credit arrangement qualifies as a loan for § 523(a)(8) purposes)
- Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (Sup. Ct.) (exceptions to discharge must be narrowly and plainly construed)
- Conn. Nat’l Bank v. Germain, 503 U.S. 249 (1992) (statutory interpretation: presume Congress says what it means and means what it says)