Supreme Court Rules Against Student Loan Industry

Rejecting the views of 33 states, the federal government, and the student loan industry, the Supreme Court today unanimously ruled in favor of a loan delinquent who used the bankruptcy laws to restructure his debt.

The decision in United Student Aid Funds v. Espinosa was the only ruling handed down today, and the Court is not expected to issue any rulings when it sits tomorrow, making it unlikely there will be any rulings again from the Court before March 30, the next decision day on which it will be in session. Several cases argued at the beginning of the term -- including First Amendment blockbusters United States v. Stevens, involving animal cruelty videos, and Salazar v. Buono, concerning religious symbols on public property -- remain undecided.

The student loan case decided today was argued Dec. 1, and the ruling was authored by Justice Clarence Thomas. In it, the Court said a bankruptcy court order that forgave part of the debt was valid even though the student did not show at an adversary proceeding that repayment would pose an "undue hardship." Thomas said the failure by Francisco Espinosa to initiate such a proceeding did deprive the loan company of a right granted by a procedural rule, but "did not amount to a violation of United's constitutional right to due process." The company had been notified of Espinosa's plan and did not object, Thomas noted.

Comments

[Steve]

This holding is a non-issue. When notified of plans by chapter 13 debtors, student lenders will reply with a form to the effect that they disapprove any provisions whose effects amount to a discharge without showing undue hardship in an adversary proceeding at the end of the plan, per 11 USC xxx (and the relevant procedural rule). Espinosa, if not the first, will certainly be the last debtor to get away with this clever little play.

[Still Paying Mine]

SO Obama saw it coming and helped out the banking industry by making the Federal Govt the vendor off all future loans as part of the Health Care bill. Amazingly timely and expensive for taxpayers in the future.

[afgail]

OMG Thomas sided with a person over a corporation. Scalia must have been out of town.