WASHINGTON, D.C. — A student loan agency told the U.S. Supreme Court Dec. 1, that allowing debtors to discharge their student loan debts by “mere declaration opens the door to recategorizing every category of non-dischargeable debt,” (United Student Aid Funds Inc. v. Francisco J. Espinosa, No. 08-1134, U.S. Sup.).
Espinosa argued that he gave USAF notice of the proposed plan, which included a plain and detailed plan that the outstanding principal balance of the student loan would be paid but all other charges would be discharged, and USAF did not object to it.
Moreover, Espinosa maintained that USAF collected its entire amount due under the plan and then ignored the Bankruptcy Court injunction against collection.
Madeleine C. Wanslee, arguing for USAF, argued that the only way student loan debt can be discharged in Chapter 13 bankruptcy is if the Bankruptcy Court finds it presents an undue hardship to the debtor
In the case at hand, Wanslee argued that there was never even an allegation of undue hardship, much less proof.
Toby J. Heytens, of the Office of the U.S. Solictor General, argued, "The logical consequences of affirming the Ninth Circuit’s judgment in this case is to tell every single Chapter 13 debtor who has a student loan debt to include a provision like this in his plan, in the hopes that the creditor will not object and he will be able to obtain a discharge in the absence of any finding by the Bankruptcy Court."