Andersen v. Higher Educ. Assistance Found. (In re Andersen) - 215 B.R. 792 (B.A.P. 10th Cir. 1998)

Rule:

Where a plan resolves a potential controversy about whether payment of a student loan would result in an undue hardship to the debtor and confirmation of the plan constituted a finding to that effect that the loan was dischargeable pursuant to 11 U.S.C.S. § 523(a)(8)(B) and 11 U.S.C.S. § 1328(a), the ultimate order of discharge properly discharges the balance of the student loan obligation.

Facts:

Appellant debtor filed and confirmed a Chapter 13 plan that contained negative notice that confirmation of the plan would constitute a finding that she was entitled to hardship discharge of her student loan obligations to the loan holders pursuant to 11 U.S.C.S. § 523(a)(8)(B. The debtor had not filed an adversary proceeding but the loan holders had notice of the plan and filed an untimely objection to it. After completion of the plan the debtor received a discharge. The loan holders continued collection efforts. The lower court concluded that the student loans had not been discharged by the plan. The debtor appealed. 

Issue:

Were the student loans discharged by the Chapter 13 plan?

Answer:

Yes.

Conclusion:

On appeal, the court reversed and remanded with directions that an order of discharge as to the student loans be entered. The court based its decision on the fact that the loan holders had obvious notice of the adverse plan provision and had failed to file a timely objection. Because that notice satisfied due process the confirmation of the plan was res judicata as to the dischargeability of the student loans. The case was remanded for entry of an appropriate order and for a determination of attorney fees and costs.