Supreme Court Unanimously Upholds Discharge Of Student Loan Debt

In a surprising decision, the U.S. Supreme Court has ruled, in United Student Aids Funds v. Espinosa, that a student may discharge the interest on their student loan debt, even though the student did not allege “undue hardship” if required to repay the loans.  When the student, Francisco Espinosa, sought bankruptcy protection and submitted his plan to the bankruptcy court judge, the student loan creditor, United Student Aids Funds, did not object.  Instead, the creditor later sought to void the plan under Federal Rule of Civil Procedure 60(b)(4).

Writing for a unanimous Court, Justice Thomas stated, “Rule 60(b)(4) does not provide a license for litigants to sleep on their rights…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 Rule 60(b)(4) relief.”

As a general rule, student loans are considered non-dischargeable in the absence of proof of undue hardship to the debtor if required to repay the loans.  Will this ruling by the Supreme Court breathe new life into the question of student loan dischargeability?  That remains to be seen.  It certainly gives more than a faint glimmer of hope in an area of bankruptcy law that many students and graduates have argued should be subject to at least partial dischargeability.

For further information on the procedural history of this important new case, you may check out these links to the ABA here and here.  You may also refer to the SCOTUS blog here.  I have also placed a PDF of the Espinosa decision in the Box for downloading.

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Excellent Resource For Taxpayers Regarding Mortgages And Foreclosures

Empty Nest Syndrome
Image by bitzcelt via Flickr

If you have not yet filed your tax return and you have questions or concerns related to your mortgage or, perhaps, even a foreclosure, I recommend that you take a look at the Mortgage Law Network blog.  In particular, the blog has some articles out right now that are aimed at educating tax payers about the ramifications of mortgage forgiveness, foreclosures, and taxes about which we should all be more informed.

The Mortgage Law Network blog is part of a network which also includes the Bankruptcy Law Network.  These blogs consistently feature timely and authoritative articles on their particular subjects,.  While I am not a member of these networks, I wholeheartedly recommend these blogs to anyone who has questions or concerns about their financial situation.

Another important feature of these blogs is that they provide links to member attorneys who practice in the area of mortgage law and bankruptcy.  If you are looking for a mortgage or bankruptcy attorney, in addition to good information on these subjects, these blogs are hard to beat.

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