Alleshouse v. State Student Assistance Com'n
| Decision Date | 15 January 1991 |
| Docket Number | No. 57A03-8908-CV-367,57A03-8908-CV-367 |
| Citation | 565 N.E.2d 340 |
| Parties | 65 Ed. Law Rep. 142 Christopher ALLESHOUSE, Defendant-Appellant, v. State of Indiana, STATE STUDENT ASSISTANCE COMMISSION, Plaintiff-Appellee. |
| Court | Indiana Appellate Court |
Dennis D. Graft, Graft & Owen, Kendallville, for defendant-appellant.
Price A. Jackson, Jr., State Student Assistance Com'n, Indianapolis, for plaintiff-appellee.
This appeal is from a grant of summary judgment in favor of the lender to recover for a debtor's defaulted guaranteed student loans. The issue is whether the court properly applied the law to determine that the debt had not been discharged in bankruptcy. We conclude the court erred.
Between August 22, 1980 and August 15, 1982 Alleshouse (debtor) borrowed money and executed three promissory notes for guaranteed student loans insured by the State Student Assistance Commission of Idnaian (lender). 1 According to the terms of the notes, repayment was to commence on the "first day of the tenth calendar month following school termination."
It is agreed that school termination occurred December 10, 1982 and the parties stipulated that the first day of the tenth calendar month following termination was October 10, 1983. 2
Debtor filed a petition for bankruptcy under Chapter 7 on December 2, 1988 and received a general discharge on March 3, 1989. While the student loans were a scheduled debt, their dischargeability was not expressly litigated in the bankruptcy proceeding.
When the lender commenced this action, the debtor asserted his bankruptcy discharge and the lender responded that the loans were not dischargeable.
Pursuant to 11 U.S.C. Sec. 523(a)(8)(A):
(a) A discharge ... does not discharge an individual from any debt
* * * * * *
(8) for an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, unless
(A) Such loan first became due before five years (exclusive of any applicable suspension of the repayment period) before the date of filing of the petition;....
Since the debtor's petition in bankruptcy was filed more than five years after the date payments first became due under the notes, the critical question is whether there was a suspension of the repayment period within the meaning of the act.
The lender contends there was. In support of that contention it points to two documents. The first was a Forbearance Agreement for the period October 10, 1983 through January 10, 1984. The form was dated January 10, 1984 and signed by the lender but not the debtor. The second was a repayment schedule calling for payments to commence on February 15, 1984. This schedule was signed by the debtor. We must determine whether those documents singly, or in tandem, created a suspension of the repayment period within the meaning of 11 U.S.C. Sec. 523(a)(8)(A).
We commence by noting that the general rule to be applied requires that exceptions to the general rule of dischargeability of debts in bankruptcy be construed strictly. In re Medeiros (Bankr.M.D.Fla.1988), 86 B.R. 284, 286. The burden is upon the creditor to establish the debt as squarely within the statutory exceptions. In re Schmidt (Bankr.N.D.Ind.1986), 70 B.R. 634, 638. Thus, the burden is upon the creditor to establish the validity of any suspension of the five year period contemplated by 11 U.S.C. Sec. 523(a)(8)(A). In re Keenan (Bankr.D.Conn.1985), 53 B.R. 913, 916. Construing exceptions in this manner advances the congressional purpose of giving debtors a fresh start. In re Schmidt, supra; In re Costantino (Bankr.D.C.S.1986), 72 B.R. 189, 190-91.
In In re Whitehead (Bankr.S.D.Ohio 1983), 31 B.R. 381 the court held that neither contract law principles nor applicable federal regulations gave a university lender the right to unilaterally grant suspensions of repayment that would except student loans from the five year requirement. The court said:
To support the contention that the payment of a note has been extended, there must exist ... adequate consideration and mutual consent. [citations omitted]. The agreement for extension must ... mutually bind the parties, payor and payee, the one to forbear suit during the time of extension and the other the right to pay the debt before the end of that time. [citation omitted].
The court added that the forbearance from exercising a legal right without any request to forbear, or circumstances from which an agreement to forbear might be implied, was not consideration which would support a promise.
In re Crumley (Bankr.E.D.Tenn.1982), 21 B.R. 170 reached a similar result where a lender unilaterally granted a deferment beyond that requested and agreed to. The court found the student's loans were dischargeable because only the agreed-to period qualified as a suspension. See also In re Brinzer (D.C.S.D.W.Va.1984), 45 B.R. 831 ().
These cases must be distinguished from those such as In re Shryock (Bankr.D.Kan.1989), 102 B.R. 217 and In the Matter of Eckles (D.C.E.D.Wis.1985), 52 B.R. 433, where the debtor did request the suspension.
Finally, we also note In re Keenan (Bankr.D.Conn.1985), 53 B.R. 913 where the creditor retroactively granted an unemployment deferment based on a letter from the debtor. The letter did not request deferment nor did it state that the debtor was unemployed during the period for which the deferment was granted. This was again held not to constitute a suspension that would forestall the running of the five year period.
It appears to us that Congress clearly expressed its concern that guaranteed student loans not be grossly abused by the simple device of student debtors claiming bankruptcy when their educational needs have been met. Thus during the first five years those debts are non-dischargeable. On the other hand, at some point the congressional purpose in affording debtors a new start should be acknowledged and, thus, after having made payments for five years (or at least having been...
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Tracy v. Morell
...lacks jurisdiction or is otherwise authorized by statute or the rules of procedure. See Alleshouse v. State Student Assistance Comm'n, 565 N.E.2d 340, 344 (Ind.Ct.App.1991). We hold that it was error for the trial court simply to dismiss Tracy's complaint. While the trial court held otherwi......