Legal News for Credit Union Managers Since 1990
« Nondischargeable Debt: Fraudulent Loan Application
CU Employee & Unemployment Compensation »
06
Nov
2017

Student Loans: Preferential Treatment Prohibited

 The Bankruptcy Code provides, in part, that a student loan issued by a nonprofit institution, such as a credit union, and insured by the federal government, shall not be discharged in bankruptcy, absent a showing by the debtor(s) of true hardship.

The Bankruptcy Code further provides that a Chapter 13 repayment plan may not unfairly discriminate against unsecured creditors.

In this case, debtors’ Chapter 13 plan acknowledged that they must repay 100% on their student loan, while proposing to repay the other unsecured creditors less than 100%.

The court held that the Code prohibits debtors from discriminating against other unsecured creditors while repaying 100% of the student loan.

The court refused to confirm debtors’ Chapter 13 bankruptcy. Debtors would, therefore, either need to file an amended Chapter 13 plan proposing 100% repayment to all unsecured creditors, convert the Chapter 13 to a Chapter 7 (and still repay 100% on the student loan), or dismiss the bankruptcy entirely. Groves v. LaBarge, 160 B.R. 121.

EDITOR’S COMMENT

Most courts across the country have ruled that unsecured creditors cannot be discriminated against while repaying student loans 100% while only repaying other unsecured creditors less.

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Monday, November 6th, 2017 at 4:34 am and is filed under Bankruptcy, National. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Your comment

Powered by WP Hashcash

  • Recently Posted Articles written by: Charels R. Harroun, Attorney at Law

    • Incompetency Defense in Collection Suit
    • Protecting Home Equity Mortgage Portfolios
    • Defective Automobile Lien Enforced
    • Preferential Transfer: Creditor Retains Debtor Garnishment Funds Received within 90-Days of Bankruptcy Filing
    • Refinanced Debt Fraud – No New Money
    • Collateral Taken Out-of-State
    • Chapter 13 Plan Cures Arrearage
    • Fraudulent Check Endorsement by Borrower
    • Creditor Required to Release Lien
    • Collection Letter Not Required Before Filing Suit
    • Insurance Lapse: Lift Stay & Repossess Collateral

  • Website Builder

2009-2020 Copyright Harroun, P.C. | Credit Union Legal Newsletter powered by WordPress and Uchilla
Subscribe: Entries (RSS) and Comments (RSS)