Supreme Court rules student loan debts can be discharged without undue hardship claim News
Supreme Court rules student loan debts can be discharged without undue hardship claim

[JURIST] The US Supreme Court [official website; JURIST news archive] on Tuesday ruled [opinion, PDF] unanimously in United Student Aid Funds, Inc. v. Espinosa [Cornell LII backgrounder; JURIST report] that a bankruptcy court can discharge a student loan debt even if the student has not filed a claim of "undue hardship" under 11 USC § 523 [text]. The ruling affirms a decision [opinion, PDF] from the US Court of Appeals for the Ninth Circuit, which held that student loans can be discharged within a Chapter 13 plan if the creditor receives notice of the plan and fails to object. Writing for the court, Justice Clarence Thomas said:

Where, as here, a party is notified of a plan's contents and fails to object to confirmation of the plan before the time for appeal expires, that party has been afforded a full and fair opportunity to litigate, and the party's failure to avail itself of that opportunity will not justify … relief. We thus agree with the Court of Appeals that the Bankruptcy Court's confirmation order is not void.

The ruling resolves a circuit split on the issue.

The Supreme Court has recently taken up several bankruptcy issues. On Monday, the court heard arguments [JURIST report] in Hamilton, Chapter 13 Trustee v. Lanning [oral arguments transcript, PDF] on whether, in calculating a debtor's "projected disposable income," a bankruptcy court may consider evidence suggesting that the debtor's income or expenses will differ from her prior income or expenses. Earlier this month, the court ruled [opinion, PDF; JURIST report] in Milavetz, Gallop & Milavetz v. United States [Cornell LII backgrounder] that attorneys are considered debt relief agencies under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) [text] when they provide qualifying services.