469 B.R. 553
Bankr. M.D. Penn.2012Background
- Debtors filed Chapter 13 bankruptcy and scheduled $456,221 in unsecured student loan claims.
- Debtors moved to discharge loans under § 1328(a) or under § 523(a)(8) for undue hardship.
- Defendants Loan Science, Chase, and the USDE moved for summary judgment that loans are educational and not dischargeable; Debtors cross-moved.
- Loans at issue are serviced by Loan Science, Chase, and USDE; various assignees hold proofs of claim.
- Debtors’ schedules show multiple lenders/assignees and mixed origination dates; Title IV eligibility of attended schools is noted.
- Court held loans qualify as educational loans under § 523(a)(8) but could not determine undue hardship on the record; lenders’ summary judgments denied as to hardship; some rulings granted in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TERI, KeyBank, NCT, and Chase loans qualify as educational loans under § 523(a)(8) | Rumer | Chase/KeyBank/NCT/TERI | Loans are educational loans under § 523(a)(8) |
| Whether repayment would constitute undue hardship under Brunner/Faish | Rumer | Lenders | Undue hardship issues cannot be resolved on summary judgment on record; genuine disputes remain |
Key Cases Cited
- In re Faish, 72 F.3d 298 (3d Cir. 1995) (three-factor Brunner test for undue hardship)
- Brunner v. N.Y. State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987) (three-prong test for undue hardship)
- In re Sokolik, 635 F.3d 261 (7th Cir. 2011) (focus on substance of the loan origination rather than use of proceeds)
- Murphy v. Pennsylvania Higher Educ. Assistance Agency, 282 F.3d 868 (5th Cir. 2002) (application of Brunner test to educational loans)