Contact: John Hartgen
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(703) 739-0800
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href='mailto:jhartgen@abiworld.org'>
color='#0000ff' size='3'>jhartgen@abiworld.org
RESPONDENTS
CLOSELY DIVIDED OVER WHETHER A CHAPTER 13 DEBTOR MAY OBTAIN A
“DISCHARGE BY DECLARATION”
size='3'>December 12, 2008, Alexandria, Va.
size='3'>— Respondents to the latest ABI
Quick Poll were closely divided over whether a debtor could obtain a
discharge of a student loan by including it in a chapter 13 plan if the
creditor fails to object after receiving notice. Forty-four percent of
respondents did not think that a debtor could receive a discharge of a
student loan if a creditor had received proper notice and failed to
object to the chapter 13 plan. Thirty-six percent “strongly
disagreed” and 8 percent “disagreed
somewhat.”
Fourty-three percent of
respondents, however, thought that the debtor should be able to receive
a discharge of a student loan if it was included in their chapter 13
plan and did not receive an objection from a creditor after serving the
creditor notice. Thirty percent “strongly agreed” and 13
percent “somewhat agreed.” Eleven percent of
respondents did not know or had no opinion on the issue.
Most student loans are
undischargeable in bankruptcy unless the debtor can show that loan
repayment imposes an “undue hardship,” generally a difficult
standard to meet.
In the case of
Espinosa v. United Student Aid Funds
size='3'>, the debtor included a portion of
student loan debt to be discharged in his chapter 13 plan. The court
notified United States Aid Funds, a nonprofit loan guarantee
corporation, that there was a discrepancy in the claim on the student
loan and that if the creditor wanted to object to the discrepancy, the
corporation must file a request with the trustee in the case for
resolving the discrepancy. The notice stated that if the creditor did
not send a notice or object to the claim, the amount in the
debtor’s chapter 13 plan would be discharged. When the creditor
did not object, the chapter 13 plan was confirmed and the student loan
debt was discharged. The creditor tried to collect on the amount of the
discrepancy three years later, but the Ninth Circuit Court of Appeals
upheld the discharge since proper notice was served on the
creditor.
ABI members and members
of the public were welcome to submit their response to the statement:
“A debtor may obtain a discharge of a student loan by including it
in a chapter 13 plan if the creditor fails to object after notice
(discharge by declaration). (
size='3'>Espinosa v. United Student Aid Funds, 9th Cir
size='3'>).”
ABI’s Quick Poll is
posted on ABI’s home page,
href='http://www.abiworld.org/'>
size='3'>www.abiworld.org
size='3'>. ABI members and the public are invited to respond to a
question on a timely bankruptcy or insolvency issue. Visit
href='http://www.abiworld.net/quickpoll/'>
color='#0000ff' size='3'>http://www.abiworld.net/quickpoll/
to access the results of previous
ABI Quick Polls.
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ABI is the largest
multi-disciplinary, nonpartisan organization dedicated to research and
education on matters related to insolvency. ABI was founded in 1982 to
provide Congress and the public with unbiased analysis of bankruptcy
issues. The ABI membership includes nearly 11,700 attorneys,
accountants, bankers, judges, professors, lenders, turnaround
specialists and other bankruptcy professionals, providing a forum for
the exchange of ideas and information. For additional information on
ABI, visit www.abiworld.org. For additional conference information,
visit
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