- Case Type:
- Case Status:
- 20-1172 (6th Circuit, Dec 14,2020) Published
- The U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) affirmed the grant by the U.S. Bankruptcy Court for the Eastern District of Michigan (BC), itself blessed by the U.S. District Court (DC), of the motion for summary judgment, filed by Arrowood Indemnity Company (Arrowood), that the debts incurred by Kathryn Conti (Conti) and held by Arrowood were nondischargeable “qualified education loan[s]” under § 523(a)(8)(B) of the Bankruptcy Code (Code) per this provision’s “plain language,” rejecting Conti’s own dispositive motion and dismissing her adversary complaint (Complaint).
- Procedural context:
- The first thing Conti ever docketed telegraphed her intent with crystal clarity. In the schedules that accompanied the voluntary petition for relief under Chapter 7 of the Code (Petition) filed on May 31, 2017, Conti designated the five private loans (Loans) that she had taken from Citibank (Citibank) to finance her education at the University of Michigan (Michigan) as outside § 523(a)(8)(B)’s prohibition on the discharge of “qualified education loan[s].” Not until October did Conti commence an adversary proceeding imploring the BC to make this same determination. Both Conti and the target of her ire—Arrowood, the entity to whom Citibank had assigned the Loans prepetition (together with Conti, Parties)—cross-moved for summary judgment. On October 23, 2018, after holding a hearing on these dueling documents, the BC granted Arrowood’s motion and denied Conti’s. On appeal, the DC affirmed. Conti timely appealed to the Sixth Circuit. In their papers, both Parties urged the Sixth Circuit to look to “the initial purpose of Conti’s loans, rather than their actual uses, to determine whether they f[e]ll within the scope of [§ 523(a)](8)(B).”
- Like so many others, Conti began her undergraduate education with patent optimism—and ended it, whether still sanguine or not, in unmistakable debt. From 1999 to 2003, Conti attended Michigan, graduating with a bachelor’s degree in musical arts. In order to finance three years of this four-year education, Conti applied for the Loans, ultimately borrowing $76,049. Conti’s application for each Loan contained a number of identically worded key elements. All were expressly “[f]or students attending 4-year colleges and universities”; all requested information regarding the school’s identity, the academic year for which the funds are intended, and the amount of the loan requested; and all advised that the student may “borrow up to the full cost of education less any financial aid [they] are receiving.” Each included a section aimed at the pertinent school financial aid office, allowing for the certification of the student applicant’s year, enrollment status, loan amount (not to exceed the cost of education when combined with other financial aid), and recommended disbursement dates. Akin to mortgage transactions, each application incorporated by reference an attached promissory note (PN), referred to as the “entire agreement” between Citibank and the Debtor. Among other provisions, the PN for all five Conti Loans announced: “[T]he proceeds of this loan are to be used for specific educational expenses.” After Conti signed the relevant paperwork, Citibank disbursed each loan to Michigan directly, seemingly in accordance with standard practice. By all accounts, these amounts never exceeded the cost of attendance at Michigan for the relevant period once the maximum amount of Conti’s federal Pell grant, the only financial aid she recalled receiving, was subtracted. The fifth and final Loan was disbursed in February 2003. After her graduation, a familiar turn of events took place. For several years, from “around 2011 to early 2016,” Conti made the requisite payments; during this time, Citibank assigned the payments to Arrowood. In 2017, however, Conti filed the Petition. In the appended schedules, Conti claimed the Loans were not excepted under § 523(a)(8) and were thus fully dischargeable. A few months later, she made her move.
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