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Margaret Kinney v. HSBC Bank USA

Summarizing by Lars Fuller

McDaniel v. Navient Solutions

Case Type:
Consumer
Case Status:
Affirmed
Citation:
18-1445 (10th Circuit, Aug 31,2020) Published
Tag(s):
Ruling:
An educational loan is not an obligation to repay funds received as an educational benefit, for purposes of 11 U.S.C. § 523(a)(8)(A)(ii). Such an interpretation would render the the statute's use of the word "or" meaningless, improperly conflating "loan," which is used in clause (i), and "funds received as an educational benefit," which is used in clause (ii).
Procedural context:
The United States Bankruptcy Court for the District of Colorado denied defendant's motion to dismiss a complaint seeking a declaratory judgment that certain student loans had been discharged in the debtors' chapter 13 case because the loans did not qualify for nondischargability under 11 U.S.C. § 523(a)(8)(A)(ii). The defendant appealed, and the defendant and the debtors jointly certified under 28 U.S.C. § 158(d)(2)(A) that the issue on appeal deserved direct, interlocutory consideration by the Court of Appeals. The Court of Appeals granted leave to appeal the bankruptcy court's order.
Facts:
Byron and Laura McDaniel filed a chapter 13 petition in 2009. Among their debts were eleven accounts with Sallie Mae totaling about $200,000. The McDaniels characterized the Sallie Mae debts as “educational” and acknowledged that the Sallie Mae debts were for six private student loans that Laura McDaniel used to pay college expenses. The McDaniels, however, asserted in their chapter 13 plan that they had no student loans. The chapter 13 trustee objected to confirmation of the plan because, among other reasons, the plan didn’t provide for payment of the nondischargable student loan debt. (The McDaniels also had federally insured student loan debt that the McDaniels acknowledged was nondischarbeable.) Before the bankruptcy court reached the merits of the trustee’s objections, the McDaniels informed the court at a hearing that they needed to amend their plan. The bankruptcy court denied their plan and gave them time to file an amended plan. The trustee’s objections were denied as moot. The McDaniels filed an amended plan that treated student loans as “unsecured Class 4 claims” or deferred payment until the end of the plan. Class 4 claims are allowed unsecured claims not otherwise referred to in the plan. The plan did not specify whether Class 4 claims, deferred claims, or student loan claims were excepted from discharge. While Sallie Mae (now known as Navient) filed proofs of claim, it did not object to confirmation of the McDaniels’ amended plan. The bankruptcy court confirmed the McDaniels’ amended plan in 2010. In 2015, the McDaniels certified that they had made all payments required under the amended plan. The trustee’s final report showed that the McDaniels had had nearly $27,000 on Navient’s claims under the confirmed plan. The bankruptcy court granted the McDaniels a discharge in March 2015. The order did not specify which debts were discharged, but did state that “[d]ebts for most student loans” were not discharged. The bankruptcy court closed the McDaniels’ case in June 2015. Over the next two years, the McDaniels paid Navient an additional $37,460. In June 2017, the McDaniels asked the bankruptcy court to reopen their case. The court granted their motion. Upon reopening their case, the McDaniels filed an adversary proceeding against Navient seeking a declaratory judgment that the Sallie Mae loans were discharged in bankruptcy and damages based on Navient’s collection activities. In the adversary proceeding, the McDaniels argued that the loans were not “qualified educational loans” under 11 U.S.C. § 523(a)(8)(B) because they “were not made solely for the ‘cost of attendance’” for Laura McDaniels to attend college. The McDaniels, however, acknowledged that the loans were “student loans.”
Judge(s):
BRISCOE, HOLMES, and EID

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