527 B.R. 410
Bankr. D. Or.2015Background
- Debtor Joel A. Nunez obtained two loans in 2004–2005 from Key Education/Key Bank to attend Wings of the Cascades flight school; he later withdrew and the school (Spirit Flight, Inc.) closed and later filed chapter 7.
- The promissory notes identify Key Bank USA, N.A., a for-profit bank, as the lender; Key Education opposes dischargeability.
- Nunez filed chapter 7 on April 30, 2014, listed a $120,105 debt to Key Education, and filed this adversary complaint seeking a declaration that the debt is dischargeable under 11 U.S.C. § 523(a)(8).
- The court took judicial notice of the U.S. Dept. of Education School Codes Lists (2004–2006) and the chapter 7 docket; Wings of the Cascades/Spirit Flight do not appear on the School Codes Lists.
- The core legal question was whether the loans are nondischargeable under § 523(a)(8)(A) (loans made/guaranteed by government or made under program funded by nonprofit) or § 523(a)(8)(B) (qualified education loans under IRC §221).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §523(a)(8)(A) applies (loan made/insured/guaranteed by government or under program funded by nonprofit) | Nunez argued the loans were educational and should not be excepted from discharge under (A) because his position emphasized lack of government/nonprofit status | Key Education relied on loan purpose (educational) and the lender relationship to argue nondischargeability under §523(a)(8) | Court held (A) does not apply: lender (Key Bank) is neither a governmental unit nor a nonprofit, so (A) exclusion is inapplicable |
| Whether §523(a)(8)(B) applies (qualified education loan under IRC §221) | Nunez argued the flight school was not an eligible educational institution, so loans are not qualified education loans | Key Education disputed dischargeability under (B), asserting the loans financed education and were thus within the §221 qualified-loan scope | Court held (B) does not apply: school was not an "eligible educational institution" on Title IV lists for 2004–2006, so loans are not qualified education loans |
Key Cases Cited
- Kawaauhau v. Geiger, 523 U.S. 57 (Sup. Ct.) (exceptions to discharge construed narrowly)
- Anderson v. Liberty Lobby, 477 U.S. 242 (Sup. Ct.) (summary judgment standard)
- Mele v. Mele (In re Mele), 771 F.3d 1119 (9th Cir.) (narrow construction of discharge exceptions)
- Snoke v. Riso (In re Riso), 978 F.2d 1151 (9th Cir.) (same principle on exceptions)
- Plumbers Joint Apprenticeship & Journeyman Training Comm. v. Rosen (In re Rosen), 179 B.R. 935 (Bankr. D. Or.) (analyzing §523(a)(8) scope re: nonprofit apprenticeship program)
- United States v. Alvarez-Hernandez, 478 F.3d 1060 (9th Cir.) (statutory construction presumption that Congress knows existing judicial interpretations)