U.S. Supreme Court

Supreme Court to Consider Abbreviated Discharge of Student Loan

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The U.S. Supreme Court has agreed to decide whether student loans can be dismissed in bankruptcy absent proof that repayment constitutes an “undue hardship.”

Debtor Francisco Espinosa declared a discharge of part of his student debt in his bankruptcy plan rather than proving undue hardship in an adversarial hearing, as required by the bankruptcy rules. One issue is whether the order discharging the debt is void, according to the petition for certiorari (PDF posted by SCOTUSblog). A second issue is whether Espinosa’s notice to United Student Aid Funds Inc.—mailed to the post office box where he sent loan payments—was sufficient.

Espinosa claims the bankruptcy agreement is final and cannot be reopened, the Associated Press reports. He agreed to pay $13,250 on his four student loans. United Student Aid says he still owed the full amount, $17,832.

The San Francisco-based 9th U.S. Circuit Court of Appeals had sided with Espinosa. Five other federal appeals courts have reached the opposite conclusion “on indistinguishable facts,” the cert petition says.

The case is United Student Aid Funds v. Espinosa.

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