O'Brien v. First Marblehead Education Resources, Inc.O'Brien v. First Marblehead Education Resources, Inc.
Introduction
This сase 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 thе 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 apprоximately $15,000. The loan was guaranteed by defendant-ap-pellee-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 schoоl 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 pаid 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 specifiсally states that the “Promissory Note evidences an educational loan made pursuant to a loan program funded in part by a nonprоfit institution and is therefore subject to the limitations on dischargeability contained in Section 523(a)(8) of the United States Bankruptcy Code.”
On these faсts, the bankruptcy court found that the loan could not be discharged because
In a thoughtful opiniоn by Judge Robinson, the district court affirmed the bankruptcy court’s decision for two reasons. In re O’Brien,
Discussion
Title
(a) A dischargе under ... this title does not discharge an individual debtor from any debt-
(8) for an educational benefit overpayment or loan made, insured or guarantеed 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 merеly 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
The district court noted that it is undisputed that O’Brien’s loan was mаde 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 strоngly 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 “еvidences 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
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),
O’Brien has significantly more trouble differentiating a 1997 bankruptcy case already briefly mentioned above: Klein, No. 92-B-44249 (S.D.N.Y. Apr. 29, 1997). Klein involves virtually identical facts to the casе now before us. Indeed, O’Brien does not meaningfully attempt to differentiate Klein, but rather points out that we are not bound by it. O’Brien argues that we should not follow Klein because it relied on the broad language of Hammar-strom noted above. Klein is congruent with the district court’s analysis in this case.
As with Klein, O’Brien attacks another case, HEMAR Serv. Corp. of America v. Pilcher (In re Pilcher),
In our view, the plain language of thе 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 upоn graduation, filed petitions] for bankruptcy and obtained discharged of their educational loans.” Andrews Univ. v. Merchant (In re Merchant),
Conclusion
For the reasons discussed herein, we hold that
Notes
. TERI does not premise its argument on this clause in the Note.