Busson-Sokolik v. Milwaukee School of Engineering (In re Busson-Sokolik)

Summarized by Kurt Carlson , Carlson Dash LLC
15 years 3 weeks ago

Citation:

(7th Circuit, Dec 31,1969)

Tag(s):

7th Circuit

Ruling:

The Seventh Circuit Court of Appeals affirmed the denial of debtor's discharge of his educational loans, holding that the determining factor of whether educational loans are educational or not is the purpose of the loan, not the use of the loan proceeds. The Court also affirmed the award of attorney fees for the creditor, as contractually provided for within the terms of the promissory note, and not in violation of the "American Rule" as argued by debtor. Finally, the Court affirmed the denial of sanctions under 9011(c)(1)(A) by the debtor as the debtor failed to provide the creditor with any opportunity to purge itself of sanctionable conduct under the 'safe harbor' rule, and affirmed the award of sanctions, for a lesser amount (by one half), imposed by the court against the Debtor through Fed R Bankr P 8020, such that he award would have deterrent effect, rather than result in financial ruin.

Procedural context:

Appeal from a bankruptcy court ruling and district court affirming the denial of debtor's request for discharge of his educational loans under 523(a)(8)(A)(i), awarding attorney fees to the creditor, denying sanctions requested by debtor pursuant to 9011(c)(1)(A) as violating the "safe harbor" provisions of 9011, and awarding sanctions imposed by the lower court pursuant to Fed R Bankr P 8020, in an amount more suited to deterrence than financial ruin.

Facts:

Debtor was a student at the Milwaukee School of Engineering (MSOE) from September 1999 through May 2000. He borrowerd $3,000 on October 29, 1999. MSOE sued debtor in April 2005 on account of the note, and obtained a default judgment for $5,909.63. In June 2005, Debtor filed a Chapter 13 petition that was later converted to a Chapter 7 proceeding. MSOE was listed as a creditor, and Debtor filed an adversary to determine dischargeability of the debt. The bankruptcy court found the debt to be non-dischargeable and found that the Debtor owed MSOE $16,248.78, which included costs and attorney fees. Sanctions, on appeal to the District Court, were imposed by the court in an amount just exceeding $60,000.00. The Seventh Circuit reduced the sanction award by just over $30,000.00, finding same would deter future sanctionable conduct by the parties, without finanicially ruining the debtor and his counsel.

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!