510 B.R. 876
Bankr. N.D. Cal.2014Background
- Plaintiff Meridian University (private) brought an adversary proceeding seeking a determination that debts owed by debtor Tarra Christoff were nondischargeable under 11 U.S.C. § 523(a)(8).
- Debtor signed two promissory notes (2002–03 for $6,000; 2003–04 for $5,000) that provided tuition credits rather than cash; repayment was deferred and interest accrued.
- Debtor completed coursework but not her dissertation; she defaulted and an arbitrator in 2012 awarded Meridian about $5,950 plus interest (now ≈ $7,000).
- Debtor filed Chapter 7 in 2013; Meridian moved for summary judgment to except the debt from discharge under § 523(a)(8).
- The legal question centers on whether a deferred-payment obligation to a private school — where no funds were actually disbursed to the student or from a third party to the school — falls within § 523(a)(8)’s nondischargeable categories after the 2005 (BAPCPA) amendments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a deferred tuition obligation to the school (with no cash disbursed to the student or school by a third party) is nondischargeable under 11 U.S.C. § 523(a)(8) | Meridian: the deferred payment is a loan where "loan proceeds went directly to Meridian" and thus fits within § 523(a)(8) nondischargeability | Christoff: no funds were "received" by debtor (or paid by a third party to Meridian); § 523(a)(8)(A)(ii) covers only obligations to repay funds received, so debt is dischargeable | Court held debt is dischargeable: because no funds were received by debtor or paid to Meridian by a third party, subsection (A)(ii) does not apply and other subsections conceded inapplicable; grant summary judgment to debtor |
Key Cases Cited
- McKay v. Inglesan, 558 F.3d 888 (9th Cir. 2009) (construed pre-BAPCPA arrangements as loans for § 523(a)(8) purposes)
- Johnson v. Missouri Baptist Coll., 218 B.R. 449 (8th Cir. BAP 1998) (college deferred-payment arrangement treated as a loan; emphasized "advancing" credits even if no cash changed hands)
- Merchant v. Andrews Univ., 958 F.2d 738 (6th Cir. 1992) (extension of credit by institution can constitute an educational loan)
- Chambers v. NASD Reg. Tr. (In re Chambers), 348 F.3d 650 (7th Cir. 2003) (no funds changed hands and no agreement to pay later — not an educational loan)
- Renshaw v. Cazenovia Coll., 222 F.3d 82 (2d Cir. 2000) (where no funds were received, the obligation was not an "obligation to repay funds received" under § 523(a)(8))
- Oliver v. Ball State Univ. (In re Oliver), 499 B.R. 617 (Bankr. S.D. Ind. 2013) (concluded that absent funds received, debt is not excepted from discharge under § 523(a)(8))