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Tuesday, March 23, 2010

Supreme Court rules student loan debts can be discharged without undue hardship claim
Jaclyn Belczyk at 10:48 AM ET

[JURIST] The US Supreme Court [official website; JURIST news archive] on Tuesday ruled [opinion, PDF] unanimously in United Student Aid Funds, Inc. v. Espinosa [Cornell LII backgrounder; JURIST report] that a bankruptcy court can discharge a student loan debt even if the student has not filed a claim of "undue hardship" under 11 USC § 523 [text]. The ruling affirms a decision [opinion, PDF] from the US Court of Appeals for the Ninth Circuit, which held that student loans can be discharged within a Chapter 13 plan if the creditor receives notice of the plan and fails to object. Writing for the court, Justice Clarence Thomas said:

Where, as here, a party is notified of a plan's contents and fails to object to confirmation of the plan before the time for appeal expires, that party has been afforded a full and fair opportunity to litigate, and the party's failure to avail itself of that opportunity will not justify ... relief. We thus agree with the Court of Appeals that the Bankruptcy Court's confirmation order is not void.

The ruling resolves a circuit split on the issue.

The Supreme Court has recently taken up several bankruptcy issues. On Monday, the court heard arguments [JURIST report] in Hamilton, Chapter 13 Trustee v. Lanning [oral arguments transcript, PDF] on whether, in calculating a debtor's "projected disposable income," a bankruptcy court may consider evidence suggesting that the debtor's income or expenses will differ from her prior income or expenses. Earlier this month, the court ruled [opinion, PDF; JURIST report] in Milavetz, Gallop & Milavetz v. United States [Cornell LII backgrounder] that attorneys are considered debt relief agencies under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) [text] when they provide qualifying services.

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