Krieger v. Educational Credit Management Corp.

Summarized by George Spathis , Horwood Marcus & Berk Chartered
12 years 10 months ago

Citation:

No. 12-3592 (7th Cir. April 10, 2013)

Tag(s):

Ruling:

The Seventh Court held that the bankruptcy court did not abuse its discretion in discharging debtor's student loan obligation under Section 523(a)(8) of the Bankruptcy Code. The panel was divided however, as to the wisdom of the District Court's reasoning (which had reversed the discharge), that a showing of a "good faith effort to repay the loans" required a "commitment to future efforts to repay." Writing for the Court, Chief Judge Easterbrook concluded that the "good faith" obligation should not be so construed. Otherwise, there could never be a such a discharge because it is always possible that future prospects would improve and allow for payment.

Procedural context:

Creditor, the Educational Credit Management Corp., appealed a discharge of student loan obligations. After the District Court reversed, the debtor appealed to the Seventh Circuit which reversed, concluding that there was not a showing that the bankruptcy judge had abused his/her discretion in granting the discharge.

Facts:

An educated but truly destitute debtor sought and obtained a discharge of her student loans based upon an "undue hardship," as defined by the three part test articulated in In re Roberson, 999 F.2d 1132 (7th Cir. 1993). The District Court reversed holding, in part, that the final part of that test, requiring a showing of a "good faith effort to repay the loans" should be construed to require some level of "commitment to future efforts to repay."

Judge(s):

Easterbrook, Chief Judge, and Manion and Rovner, Circuit Judges

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