193 F.3d 1083 (9th Cir. 1999), 98-15942, In re Pardee v. Great Lakes Higher Education Corp.
| Citation | 193 F.3d 1083 |
| Party Name | In re: ROBERT MCKNIGHT PARDEE; DARLENE DAIGLE-PARDEE, Debtors. GREAT LAKES HIGHER EDUCATION CORPORATION, Appellant, v. ROBERT MCKNIGHT PARDEE; DARLENE DAIGLE-PARDEE, Appellees. |
| Case Date | July 07, 1999 |
| Court | United States Courts of Appeals, U.S. Court of Appeals — Ninth Circuit |
Page 1083
Argued and Submitted May 13, 1999--San Francisco, California
Order Filed October 25, 1999
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Lloyd J. Blaney, Dew & Blaney, Madison, Wisconsin; Karen A. Ragland, Ferns, Garwacki & Adams, Pasadena, California, for the appellant.
James L. Robinson, Jr., Tucson, Arizona, for the appellees.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel Ryan, Klein, and Jones, Judges, Presiding.
Before: Donald P. Lay,1 Harry Pregerson and Michael Daly Hawkins, Circuit Judges.
ORDER
LAY, Circuit Judge:
The memorandum disposition filed July 7, 1999, is redesignated as an authored opinion by Judge Lay.
OPINION
Robert and Darlene Pardee filed a Chapter 13 plan that expressly purported to discharge post-petition interest on a student loan debt that the Pardees owed to Great Lakes Higher Education Corporation ("Great Lakes"). Great Lakes did not object to the plan and it was later confirmed. Great Lakes did not appeal confirmation of the plan. After the Pardees received their Chapter 13 discharge, however, Great Lakes attempted to collect $6,095.92, the interest on the student loan debt that had accrued after the bankruptcy petition was filed. The Pardees filed a motion in the bankruptcy court to enforce the discharge of the interest and to enjoin Great Lakes from further attempts to collect the debt. The bankruptcy court granted the motion and the Bankruptcy Appellate Panel ("BAP") affirmed the bankruptcy court's order enjoining Great Lakes from further debt collection activity. The BAP held (1) that the confirmed Chapter 13 plan was res judicata regarding the discharge provision contained in the plan even if the provision violated the Bankruptcy Code, and (2) that Great Lakes' failure to object to the plan or to appeal its confirmation constituted a waiver of its ability to challenge the provision or collect the interest. See Great Lakes Higher Educ. Corp. v. Pardee (In re Pardee), 218 B.R. 916, 925 (BAP 9th Cir. 1998). Great Lakes appeals and we affirm.
Student loan debts are nondischargeable in Chapter 13 unless two exceptions set forth in the Bankruptcy Code apply. See 11 U.S.C. SS 523(a)(8), 1328(a)(2). 2 The Code is silent, however,
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about whether post-petition interest on a nondischargeable student loan is also nondischargeable. The BAPheld that the post-petition interest is nondischargeable.3 We need not decide this issue,4 however, because we agree with the BAP's conclusion that Great Lakes' failure to object to the plan or to appeal the confirmation order "constitutes a waiver of its right to collaterally attack the confirmed plan postconfirmation on the basis that the plan contains a provision contrary to the Code." See In re Pardee, 218 B.R. at 922.
As the BAP recognized, while a creditor is generally not required to object to a plan that does not purport to pay post-petition interest because post-petition interest cannot be collected through the bankruptcy estate pursuant to 11 U.S.C. S 502(b)(2), the facts of this case are different. The Pardees' plan contained a provision that expressly purported to discharge the post-petition interest on their student loan debt and relieve them of liability for the post-petition interest.5 The
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Pardees placed language in their plan that, if confirmed, would clearly have a negative impact on Great Lakes' ability to collect post-petition interest. Great Lakes had notice of the plan and of this discharge provision, yet it failed to file an objection to the plan. Great Lakes clearly failed to take an active role in protecting its own interests. It now takes the position that the discharge provision contained in the Pardees' plan violated 11 U.S.C. SS 523(a)(8) and 1328(a)(2) because it purported to discharge student loan debt without addressing the two exceptions to the nondischargeability of student loan debt set forth in S 523(a)(8). However, Great Lakes should have raised this argument in the bankruptcy court by objecting to the plan prior to its confirmation, or by appealing the bankruptcy court's confirmation of the plan. It failed to do either.
The Tenth Circuit recently rejected a student loan creditor's post-confirmation attempt to challenge a discharge provision contained in a confirmed Chapter 13 plan. See Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999). In In re Andersen, the debtor's confirmed Chapter 13 plan included a provision which purported to discharge the balance of an unpaid student loan. See id. at 1255-57. The creditor failed to object to or appeal the bankruptcy court's confirmation order. See id. The Tenth Circuit concluded that the debt was discharged by the creditor's failure to challenge the plan during the bankruptcy proceedings, along with the res judicata effect of the confirmed plan and strong policy favoring the finality of confirmation orders. See id. at 1259-60. The court stated,"[a] creditor cannot simply sit on its rights and expect that the bankruptcy court or trustee will assume the duty of protecting its interests." Id. at 1257-58. The court continued, "it is absolutely incumbent upon a creditor to take an active role in protecting its interests, and a creditor which fails to do so is in a poor position to later complain about an adverse result." Id. The court stated that "[a]lthough the provision at issue did not comply with the Code, it is now too late for [the creditor] to make the argument" that it failed to timely...
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