Discharging Student Debt Without Undue Hardship Finding

Posted on June 22, 2009. Filed under: Uncategorized |

The United States Supreme Court has granted certiorari in United Student Aid Funds, Inc. v. Espinosa (Docket No. 08-1134), 2009 WL 646192, a case in which the Ninth Circuit Court of Appeals held that a debtor could discharge student loan debt by including it in a Chapter 13 plan, without complying with the heightened notice requirements embodied in the Bankruptcy Code and the bankruptcy rules and without initiating an adversary proceeding in which the debtor would be required to show undue hardship. In this decision, Espinosa v. United Student Aid Funds, Inc., 545 F.3d 1113 (C.A.9-Ariz. 2008), op. amended and superseded, 553 F.3d 1193 (C.A.9-Ariz. 2008), the Ninth Circuit further held that the student loan creditor’s due process rights were not violated because the creditor received actual notice of the debtor’s Chapter 13 case and proposed plan.

With unemployment continuing to rise, leaving students and employees without any option to pay their increasingly large student loans, this is a very important case.  Tuition costs continue to rise at colleges and universities across the country, leaving students with larger and larger student loan debt.

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