In Re: Kelli M. O'Brien Debtor Kelli M. O'brien, Debtor-Appellant v. First Marblehead Education Resources, Inc., Formerly Known as the Education Resources Institute, Inc., Also Known as Teri, Creditor-AppelleeIn Re: Kelli M. O'Brien Debtor Kelli M. O'brien, Debtor-Appellant v. First Marblehead Education Resources, Inc., Formerly Known as the Education Resources Institute, Inc., Also Known as Teri, Creditor-Appellee
Brett J. Nizzo, (Antonia M. Donohue, on the brief), Jaspan Schlesinger Hoffman LLP, Garden City, New York, for creditor-appellee.
Before: WESLEY and HALL, Circuit Judges, and TRAGER,1 District Judge.
PER CURIAM.
Introduction
This case presents a declaratory judgment action in which plaintiff-appellant-debtor seeks discharge of a debt owed to defendant-appellee-creditor. Specifically, Plaintiff-appellant disputes the lower courts’ findings that her debt on law school loans under the Law Access Loan Program cannot be discharged in bankruptcy. In our view, the statute renders plaintiff-appellant‘s loan non-dischargeable; we now affirm.
Background
In 1995, pursuant to the Law Access Loan Program, O‘Brien received the student loan now at issue from Key Bank in the amount of approximately $15,000. The loan was guaranteed by defendant-appellee-creditor The Education Resources Institute (“TERI“), a not-for-profit corporation that conditionally guarantees loans extended by private lenders under TERI‘s student loan programs. While TERI asserts that the loan would not have been made without its guarantee, there is no dispute that TERI did not provide any of the funds advanced to O‘Brien by Key Bank.
After graduating from law school and practicing as a public interest lawyer, O‘Brien defaulted on the loan. As a result, TERI‘s guarantee of the loan came into play; TERI paid Key Bank the outstanding balance due on the loan and, as the new holder of O‘Brien‘s note, became O‘Brien‘s creditor. The note specifically states that the “Promissory Note evidences an educational loan made pursuant to a loan program funded in part by a nonprofit institution and is therefore subject to the limitations on dischargeability contained in Section 523(a)(8) of the United States Bankruptcy Code.”
On these facts, the bankruptcy court found that the loan could not be discharged because
Discussion
Title
(a) A discharge under ... this title does not discharge an individual debtor from any debt—
....
(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution....
O‘Brien‘s core argument is that TERI merely guaranteed, rather than funded, O‘Brien‘s loan, and that as such O‘Brien‘s debt on the loan is dischargeable. O‘Brien highlights the fact that the first clause of
Section 523(a)(8) does not require that TERI fund O‘Brien‘s loan in order for that section to be applicable. Rather,
The district court noted that it is undisputed that O‘Brien‘s loan was made through a program that in turn was funded by a nonprofit institution. Id at 262. Similarly, TERI‘s uncontested description of its relationship with the Law Access Loan Program strongly suggests that TERI funded the program. TERI was clearly devoting some of its financial resources to supporting the program. See Klein, No. 92-B-44249, slip. op. at 12 (S.D.N.Y. Apr. 29, 1997) (concluding that TERI funded program by guaranteeing loans made pursuant thereto). We also note that the Promissory Note for O‘Brien‘s loan itself stated that it “evidences an educational loan made pursuant to a loan program funded in part by a nonprofit institution and is therefore subject to the limitations on dischargeability contained in Section 523(a)(8) of the United States Bankruptcy Code.”2
None of the cases discussed by either party are to the contrary. The earliest case of clear relevance is The Education Resources Institute, Inc. v. Hammarstrom (In re Hammarstrom), 95 B.R. 160 (Bankr.N.D.Cal.1989). Hammarstrom involved a similar fact pattern to that before us with one significant difference: in Hammarstrom, a private bank extended a loan to the debtor, and the bank then immediately sold the loan to a nonprofit, which then held the debt. O‘Brien argues that Hammarstrom involves a fact pattern in which a nonprofit in essence supplied the funds extended to the debtor. O‘Brien thus contends that Hammarstrom was right on its facts, but that the Hammarstrom court‘s conclusion that “Congress intended to include within section 523(a)(8) all loans made under a program in which a nonprofit institution plays any meaningful part in providing funds” is mere dicta. Hammarstrom, 95 B.R. at 165.
As with Klein, O‘Brien attacks another case, HEMAR Serv. Corp. of America v. Pilcher (In re Pilcher), 149 B.R. 595 (9th Cir.BAP1993), simply on the basis that HEMAR should not have relied on Hammarstrom‘s so-called dicta. But Pilcher is clear, and clearly on point, holding specifically that loans pursuant to the Law Access Loan Program are non-dischargeable under
In our view, the plain language of the statute, its structure, and the efforts of other courts in applying it to similar circumstances compel an affirmance here. Clearly, O‘Brien‘s student loan was made under a program that was funded in whole or in part by a nonprofit institution. Furthermore, we agree with the Sixth Circuit‘s analysis of the statute‘s legislative history that “the exclusion of educational loans from the discharge provisions was designed to remedy an abuse by students who, immediately upon graduation, filed petition[s] for bankruptcy and obtained ... discharge[s] of their educational loans.” Andrews Univ. v. Merchant (In re Merchant), 958 F.2d 738, 740 (6th Cir.1992) (citing H.R.Rep. No. 95-595, 95th Congress, 1st Sess. 466-75 reprinted in 1978 U.S.Code Cong. & Admin. News 5787). Like the Sixth Circuit and the cases noted above, we find that the statute‘s use of the words “any program funded in whole or in part” include the loan program in question here.
Conclusion
For the reasons discussed herein, we hold that