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United Student Aid Funds, Inc. v. Espinosa

Supreme Court of the United States

December 1, 2009, Argued; March 23, 2010, Decided

No. 08-1134

Opinion

 [*263]  [**1373]  Justice Thomas delivered the opinion of the Court.

Under Chapter 13 of the Bankruptcy Code (Code), a debtor may obtain a discharge of certain government-sponsored student loan debts only if failure to discharge that debt would impose an “undue hardship” on the debtor and his dependents. 11 U.S.C. §§ 523(a)(8), 1328. The Federal Rules of Bankruptcy Procedure require bankruptcy courts to make this undue hardship determination in an adversary [*264]  proceeding, see Rule 7001(6), which the party seeking the determination must initiate by serving a summons and complaint on his adversary, see Rules 7003, 7004, 7008. The debtor in this case filed a plan with the Bankruptcy Court that proposed to discharge a portion of his student loan debt, but he failed to initiate the adversary proceeding as required for such discharge. The creditor received notice of, but did not object to, the plan, and failed to file an  [***166] appeal after the Bankruptcy Court subsequently confirmed the plan. Years later, the creditor filed a motion under Federal Rule of Civil Procedure 60(b)(4)  [****8] asking the Bankruptcy Court to rule that its order confirming the plan was void because the order was issued in violation of the Code and Rules. We granted certiorari to resolve a disagreement among the Courts of Appeals as to whether an order that confirms the discharge of a student loan debt in the absence of an undue hardship finding or an adversary proceeding, or both, is a void judgment for Rule 60(b)(4) purposes.

Between 1988 and 1989, respondent Francisco Espinosa obtained four federally guaranteed student loans for a total principal amount of $13,250. In 1992, Espinosa filed a bankruptcy petition under Chapter 13. That chapter permits individual debtors to develop a plan to repay all or a portion of their debts over a period of time specified in the plan. See Nobelman v. American Savings Bank, 508 U.S. 324, 327, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993); see also §§ 301(a), 1321; Fed. Rule Bkrtcy. Proc. 3015(b). A proposed bankruptcy plan becomes effective upon confirmation, see §§ 1324, 1325, and will result in a discharge of the debts listed in the plan if the debtor completes the payments the plan requires, see § 1328(a).

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559 U.S. 260 *; 130 S. Ct. 1367 **; 176 L. Ed. 2d 158 ***; 2010 U.S. LEXIS 2750 ****; 78 U.S.L.W. 4207; 63 Collier Bankr. Cas. 2d (MB) 428; 52 Bankr. Ct. Dec. 254; Bankr. L. Rep. (CCH) P81,716; 76 Fed. R. Serv. 3d (Callaghan) 364; 22 Fla. L. Weekly Fed. S 173

UNITED STUDENT AID FUNDS, INC., Petitioner v. FRANCISCO J. ESPINOSA

Subsequent History: Sanctions allowed by Espinosa v. United Student Aid Funds, Inc. (In re Espinosa), 2011 Bankr. LEXIS 2305 (Bankr. D. Ariz., June 8, 2011)

Prior History:  [****1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

Espinosa v. United Student Aid Funds, 553 F.3d 1193, 2008 U.S. App. LEXIS 28103 (9th Cir. Ariz., 2008)

Disposition: 553 F.3d 1193, affirmed.

CORE TERMS

confirming, bankruptcy court, student loan, undue hardship, void, adversary proceedings, notice, summons, provisions, fail to object, due process, rights

Bankruptcy Law, Procedural Matters, Adversary Proceedings, Causes of Action, Discharge & Dischargeability, Exceptions to Discharge, Student Loans, Individuals With Regular Income, Plans, Plan Contents, Plan Confirmation, Effects of Confirmation, Civil Procedure, Appeals, Amicus Curiae, Appellate Briefs, Reviewability of Lower Court Decisions, Preservation for Review, US Supreme Court Review, General Overview, Judgments, Judgments, Relief From Judgments, Void Judgments, Commencement of Adversary Proceedings, Jurisdiction, Constitutional Law, Fundamental Rights, Procedural Due Process, Scope of Protection, Embezzlement & False Representations, Malicious & Willful Injury, Service of Process, Waiver of Process & Service, Professional Responsibility