Biegler v. Educ. Credit Mgmt. Corp. (In re Biegler), Case No. 95–63615
| Decision Date | 08 June 2018 |
| Docket Number | Adv. Proc. No. 15–80005,Case No. 95–63615 |
| Citation | 586 B.R. 388 |
| Parties | IN RE: Eric D. BIEGLER and Julia A. Biegler, Debtors. Julia A. Biegler, Plaintiff, v. Educational Credit Management Corporation, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of New York |
James F. Selbach, Law Firm, PLLC, 290 Elwood Davis Road, Suite 290, Liverpool, NY 13088, for Plaintiff.
William S. Nolan and Emily Perks Quinlan, Whiteman Osterman & Hanna, LLP, One Commercial Plaza, Albany, NY 12260, for Defendant.
This bankruptcy case was reopened to allow Plaintiff/Debtor Julia A. Biegler to bring this adversary proceeding which seeks a declaration of dischargeability of her student loans pursuant to the 1995 version of 11 U.S.C. § 523(a)(8)(A) that was in effect at the time the bankruptcy case was filed.1 Educational Credit Management Corporation ("ECMC") answered, asserting that the Debtor's loans were nondischargeable. Following discovery, Plaintiff moved for summary judgment, which was denied.2 On March 23, 2018, the court held a trial to determine whether Debtor's loans-which include eight Stafford Loans and three Auxiliary Loans to Assist Students ("ALAS" or "Auxiliary Loans")—were in repayment for seven years or longer, exclusive of any grace periods, deferments, or forbearances.3 The matter is now before the court for decision.4 For the reasons that follow, the court finds that Debtor's Stafford loans were in repayment for less than seven years and are nondischargeable, but Debtor's Auxiliary Loans were in repayment for more than seven years and have been discharged.
The court has jurisdiction to hear and decide this core proceeding pursuant to 28 U.S.C. §§ 1334(b), 157(a), (b)(1), and. This memorandum-decision and order incorporates the court's findings of fact and conclusions of law as permitted by Fed. R. Bankr. P. 7052.
Debtors Eric D. Biegler and Julia A. Biegler filed a joint chapter 7 petition on October 10, 1995. Their schedules listed certain educational loans taken out by the Plaintiff which have since been assigned to ECMC. Debtors received a discharge and the case was closed. Attempts to collect on the educational loans continued. Twenty years later, the case was reopened for the filing of this adversary proceeding in which Plaintiff seeks declaratory relief that the student loan debts at issue were encompassed by her discharge.
Debtor began a doctoral degree program at Syracuse University ("SU") in the fall of 1982. Doc. 91. To pay for her studies, Debtor incurred eleven student loans (the "Loans"), eight under the Stafford Loan program and three under the Auxiliary Loans to Assist Students program. Per Debtor's testimony and Defendant's records, the Loans were made by Onondaga Savings Bank ("Lender"), guaranteed by HESC ("Guarantor"), and serviced by several different servicers over time, including ACS and AFSA (interchangeably referred to as "Servicer").
Each time Debtor received a Stafford loan, she agreed to terms that required her to begin repayment nine months after (i) ceasing to be matriculated, (ii) withdrawing, or (iii) dropping below half-time status by carrying fewer than six credit hours in a semester.5 Ex. A at 3, 6, 9, 12, 15, 18, 30. The terms of the April 1985 Auxiliary Loan provided that repayment of principal was deferred while Debtor attended school full-time. Ex. A at 20. The copies of contractual conditions entered into evidence for Debtor's two August 1985 Auxiliary loans are illegible. In the absence of evidence to the contrary, the court will infer that the terms for those two loans are substantially the same as the April 1985 note, as all three notes were issued by the same institution within a two-month period and no governing laws changed in the interim. Ex. A at 24 and 27.
Debtor offers a transcript from the Syracuse University Registrar, which indicates that she never dropped below half-time status through the summer semester of 1985. Ex. B. Thereafter, the transcript reflects that for the ensuing eleven years while Debtor pursued her Ph.D, she was either not enrolled as a student, or was enrolled, but carried no credit hours.6 Ex. B. In the single spring semester of 1987, while Debtor worked on her Ph.D and carried zero credit hours, Debtor requested and received full-time status in response to a form she submitted to her department. By then, according to Debtor, her nine-month grace period had already run and the Loans were in repayment. Ex. C. On the basis of these records, Debtor contends that her student deferral terminated at the conclusion of the 1985 summer semester and after a nine-month grace period, all Loans entered repayment in May 1986.
Debtor testified that she received only two suspensions in payment: (i) her student deferment through the summer of 1985 and (ii) a nine-month grace period, and that any other deferments or forbearances after the loans entered repayment were never requested. In further support of her position, Debtor testified that she began making regular payments on her student loans in May 1986 by check, paid in-person at branches of Onondaga Savings Bank or its successor, OnBank, using coupons issued by the Lender.7 Per Debtor's testimony, her loans were in repayment for seven years as of May 1993, with no suspensions of payment during that period. The following table summarizes Debtor's position.
Debtor's Analysis of Repayment Status of Loans
August 13, 1986 Debtor enrolled less than half-time
May 1, 1986 Nine-month grace period ends
May 31, 1986 Loans enter repayment
January 1, 1987 Debtor's full-time enrollment status begins
May 31, 1987 Debtor's full-time enrollment status ends
October 10, 1995 Debtor declares bankruptcy. Days of applicable suspensions on filing date 0 Total Years in Repayment on filing date 9.4 Years in repayment less applicable suspensions on filing date 9.4
Debtor submitted as evidence copies of the ten promissory notes she signed, in addition to their terms and purchase agreements, and two applications for student aid bearing her signature. Ex. A. On those two applications, dated July 2, 1985 and July 8, 1985, Debtor indicated that she would be a full-time student for the next two semesters, from May 1985 through May 1986, and that she anticipated completing her program in May 1986. Ex. A at 23 and 25. That representation is contrary to the reality of Debtor's enrollment during that period, as she carried zero credit hours in Spring 1986. Debtor acknowledged that she completed the application forms, but neither offered testimony regarding any underlying circumstances nor did she explain her representation that she would remain at full-time status through May 1986.
Defendant relies upon various paper and electronic records of the Guarantor and Servicer as evidence that Debtor's loans could not have entered repayment any earlier than March 1988. There are some inconsistencies and missing information in these records which the court will address.
Defendant relies upon an HESC Certification Inquiry Record. "Ex. 1 ("HESC Certification"). It indicates that Syracuse University reported Debtor at less than half-time status as of May 31, 1986, that she was full-time again as of January 1, 1987, and that she was less than half-time again effective May 31, 1987.8 Ex. 1. Per the credible testimony of Margaret Gonsowski, Esq., an in-house attorney at HESC, since Debtor's first period of dropping to less than half-time status lasted fewer than nine months, Debtor was entitled to another nine month grace period running from May 1987 through February 1988.9
Defendants placed in evidence a detailed history of communications and actions concerning Debtor's Stafford loans ("Stafford Account History"). This record was created by Servicer, and covers the period from May 1988 to July 1993. Ex. 6. The Stafford Account History makes clear that Servicer believed Debtor to be enrolled half-time or greater through May 1, 1988 and that her grace period ended on February 28, 1989. Ex. 6 at 41. Servicer's actions are consistent with that belief—Servicer sent Debtor an initial disclosure statement on November 30, 1988, which reflected that (i) no payments had been made at that time and (ii) the first payment on the loan was due on March 28, 1989. This evidence suggests that the seven-year repayment period ran through March 1995 exclusive of deferments, a full year later than the date suggested by the HESC Certification at Ex. 1. Ex. 6 at 44. The Stafford Account History also reflects a partially retroactive ten-month forbearance, granted June 9, 1992. Ex. 6 at 51. It indicates that on numerous occasions, Debtor or her spouse conveyed to Servicer that Debtor desired an unemployment deferral or represented that unemployment deferral forms were in the mail, but does not indicate that any such forms were ever received or deferrals granted by Servicer. Id.
Defendant's records also detailed the history of communications and actions concerning Debtor's Auxiliary loans ("Auxiliary Account History"), extending from March 1988 to July 1993. Compared to the record of the Stafford Loans, however, the Auxiliary Account History is incomplete and contradictory, as it appears that loan-related events occurred before the start of the records. The first recorded action by Servicer is an account statement sent to Debtor on March 31, 1988, but on April 27, 1988, a payment was credited to March 11, which strongly suggests that the account was in repayment prior to the first entry in the record. Ex. 8 at 30. Furthermore, at the time of the earliest recorded payment, the account balance was $5,417.78, which is $575.22 less than the amount originally disbursed, with no explanation in the record for...
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