On April 4, 2016, the U.S. Personal personal bankruptcy Court for your Eastern District of latest You’ll be able to issued an option that may significantly affect the landscape of student debt consolidation. In re Decena, No. 15-72903, 2016 WL 1371031 (Bankr. E.D.N.Y. Apr. 4, 2016). Per Judge Robert Grossman, legal court discharged an education loan from the new med school graduate who studied inside a non-accredited med school in West Africa. Legal court learned that the lent funds did not belong to the exceptions to debt consolidation inside the federal personal personal bankruptcy code, who have prevented legal court from discharging your financial troubles.
The debtor studied at St. Christopher’s College of medication within the u . s . states of Senegal, where she graduated in June 2004. She enrolled only at that med school using the school’s misrepresentation it was subsequently an authorized med school, who have permitted the debtor to sit down lower for U.S. medical board examinations to become qualified for any medical practice. When she returned towards the united states . States, she found that she really ineligible to sit down lower for your exams.
To pay for her studies, she’d requested students loan with Citizens Bank, a Rhode Island based private banking institution. Credit application revealed that the school was St. Christopher’s College of medication, which is not round the Federal School Codes Report on qualified education institutions for school loans. However, the application form used the code for just about any school situated in Berlin, Germany, which is not connected using the Senegalese school. Although the debtor attempted to repay the lent funds from 2006 to 2011, she emerged $161,591 short in their repayment to Citizens Bank.
Within This summer time 2015, the debtor filed a voluntary petition for private personal bankruptcy under Chapter 7 Bankruptcy in the Personal personal bankruptcy Code. In October 2015, she filed a complaint for declaratory judgment against Citizens Bank, attempting to declare students debt as discharged in personal personal bankruptcy. Because Citizens Bank did not answer the complaint, legal court learned that the lending company reaches default, and so examined the debtor’s petition to determine if she produced from prima facie situation for relieve her debt.
Legal court considered when the education loan will be a non-dischargeable debt under 11 U.S.C. § 523(a)(8). That provision prevents the discharge of school loans that constitute “an educational benefit, scholarship, or stipend” or “any other educational loan this is a qualified educational loan.” The availability also prevents the discharge of school loans created by governmental agencies or beneath the auspices of nonprofit institutions.
Judge Grossman notes that several courts had treated “educational benefit” under § 523(a)(8) just like a catch-all term, and for that reason all students loan might be non-dischargeable.[i] Judge Grossman couldn’t accept individuals decisions. After applying an research in to the text and legislative good status for that statute, he determined that “educational benefit” was designed to designate choices to school loans – like scholarships and stipends, which are not typically compensated back unless of course obviously the recipient doesn’t meet conditions for locating the funds. Consequently, the lent funds into consideration wasn’t an “educational benefit” that was non-dischargeable.
Additionally, the debtor’s loan in the private bank did not belong to all of those other categories of non-dischargeable education-related obligations under § 523(a)(8) – it had not been a government loan, nor would it happen to be a “qualified educational loan” (a reference to the accredited schools that are round the Federal School Code List). Rather, it absolutely was an unsecured loan for just about any non-accredited Senegalese med school. Accordingly, legal court stated that the debtor’s education loan was essentially dischargeable and relieved students of her debt. Because the court ruled inside the debtor’s favor in line with the school’s ineligibility for school loans, this case may have broader implications for other school loans for schools that are not round the Federal School Code List.
[i] See In re Corbin, 506 B.R. 287, 296 (Bankr. W.D. Wash. 2014); In re Beesley, No. 12–2444–CMB, 2013 WL 5134404 (Bankr. W.D. Pa. Sept. 13, 2013); In re Roy, No. 08–33318, 2010 WL 1523996 (Bankr. D.N.J. Apr. 15, 2010); In re Carow, No. ADV 10–7011, 2011 WL 802847 (Bankr. D.N.D. Mar. 2, 2011); In re Skipworth, No. ADV. 09–80149–JAC–7, 2010 WL 1417964 (Bankr. N.D. Ala. Apr. 1, 2010).