We've written recently about the "movement" (i.e. Facebook page) to have Congress cancel student loan debt. While a blanket cancellation doesn't appear any more likely to happen any time soon, we do have an update on what's likely to come next in the student loan debate.
As reported on Monday at SCOTUSBLOG (with link to cert petition), FindLaw's Strategist, and elsewhere, the Court agreed to hear United Student Aid
Funds, Inc. v. Espinosa, which involves the discharge of student loans via bankruptcy proceedings. Such a discharge is statutorily forbidden, of course, so what could there be for SCOTUS to decide? Is the Roberts Court just itching for a chance to do some legislating from the bench, and discover a brand-new constitutional right to be free of burdensome loan debt? Err, no. It's going to be a lot more mundane than that, and you're going to have to keep writing monthly checks.
Espinosa, it seems, listed his debt to United Student Aid Funds as one of the debts to be discharged in his Chapter 13 proceeding. Normally, you can't just do this; you first have to initiate an adversary proceeding in which you prove (while the lender works to disprove) that you have an "undue hardship" that permits your student-loan debt to be included in the bankruptcy. But even though USA Funds knew that Espinosa had listed his USA Funds debt in his petition, it didn't bother to object to
the Chapter 13 plan, and voila! Debt discharged, and no more loan
payments for Mr. Espinosa, until USA Funds later changed its mind and
took Espinosa back to court.
So SCOTUS will be deciding whether the undue-hardship proceeding can
still be required if the creditor in question had notice but failed to
object to the bankruptcy plan. Sounds like a pretty boring procedural
case to us -- besides which, even if Espinosa is successful, that will only guarantee that in the future, lenders will make sure to lodge their
objections to petitions that list student-loan debt, rather than wait
to see if they can try to collect again later. Result: loophole closed, and your student loans are going to survive a bankruptcy.
So it looks like we're still going to be waiting on our big student-loan bailout.
Congress doesn't seem interested. Maybe we need a newer, shinier
Facebook page to convince them.