In re Flynn, Bankruptcy No. 95-10073-JEY. Adv. No. 95-1017-JEY.

• Citation: 190 BR 139
• Decision Date: 28 November 1995
• Docket Number: Bankruptcy No. 95-10073-JEY. Adv. No. 95-1017-JEY.
• Parties: In re John Stephen FLYNN, Debtor. John Stephen FLYNN, Plaintiff, v. NEW HAMPSHIRE HIGHER EDUCATION ASSISTANCE FOUNDATION, Defendant.
• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of New Hampshire

190 B.R. 139 (1995)

In re John Stephen FLYNN, Debtor.

John Stephen FLYNN, Plaintiff, v. NEW HAMPSHIRE HIGHER EDUCATION ASSISTANCE FOUNDATION, Defendant.

Bankruptcy No. 95-10073-JEY. Adv. No. 95-1017-JEY.

United States Bankruptcy Court, D. New Hampshire.

November 28, 1995.

J. Christopher McGuirk, Newmarket, NH, for defendant.

John Stephen Flynn, Lempster, NH, pro se.

Jeffrey Schreiber, Trustee, Schreiber & Associates, Danvers, MA.

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

JAMES E. YACOS, Chief Judge.

This adversary proceeding came on for hearing before the Court on November 7, 1995 on a Motion for Partial Summary Judgment filed by the New Hampshire Higher Education Assistance Foundation and on a Motion for Summary Judgment filed by the plaintiff/debtor, John Stephen Flynn, both motions relating to plaintiff's Amended Complaint to Determine the Dischargeability of Student Loan Debts pursuant to 11 U.S.C. § 523(a)(8). For the reasons set forth below, the Court finds that the student loan debts became due more than seven years prior to the date the bankruptcy petition was filed and, accordingly, defendant's motion is denied and plaintiff's motion is granted.

Section 523(a)(8) requires that for a student loan debt to be dischargeable, the Court must determine either that the loan became due more than seven years prior to the filing of the bankruptcy petition, or that repayment of the loan will impose an undue hardship upon the debtor. 11 U.S.C. 523(a)(8)(A) and (B). The defendant's motion requests partial summary judgment on the issue that debtor's loans became due less than seven years prior to the filing of the bankruptcy petition¹. Therefore, defendant contends that it is not barred from proceeding to litigate the hardship ground for granting or denying discharge by the requirement that the student loan debts in question first became due not more than seven years before the filing of the bankruptcy petition. The plaintiff contends that the loans became due more than seven years prior to the date he filed his bankruptcy petition, and that the seven-year rule of section 523(a)(8)(A) therefore renders these student loans dischargeable and beyond attack by the defendant.

Summary Judgment Standard

Under Rule 56(c) of the Federal Rules of Civil Procedure, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, a request for summary judgment should be granted only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." When deciding a motion for summary judgment, the Court must read the record in the light most favorable to the nonmoving party, making all reasonable inferences in that party's favor. Levy v. F.D.I.C., 7 F.3d 1054, 1056 (1st Cir. 1993). In the matter at hand, both parties agree that there are no issues of fact with respect to the legal applicability of the 7-year rule, and this matter is therefore ripe for summary adjudication on that issue.

Dischargeability of Student Loan Debts — The 7-Year Rule

The dischargeability or nondischargeability of student loan debts is provided for, in part, by section 523(a)(8)(A) of the Bankruptcy Code. This statute provides in relevant part that:

A discharge . . . does not discharge an individual debtor from any debt. . . . for an educational . . . loan . . . unless such loan . . . first became due more than 7 years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the petition. . . .

11 U.S.C. § 523(a)(8)(A). In the present case it is stipulated and agreed that the first date that the debts became due was August 1, 1986. Accordingly, if there were no "applicable suspension of the repayment period", the seven year date after the debts first became due would have been August 2, 1993 and, because debtor filed his petition in bankruptcy on January 10, 1995, which was after the 7-year date of August 2, 1993, the student loan debts would clearly be dischargeable.

The facts of this case are that there were deferments of the "repayment period" obtained and granted as contemplated by the statute. The evidence is uncontroverted that the debtor requested and was granted two 6-month extensions of the monthly repayments due on November 1, 1986 and on the first of each month thereafter to and including October 1, 1987. Accordingly under the statute there would be an "applicable suspension of the repayment period" for those additional twelve months.

The real dispute comes down to the third alleged deferment request. The defendant contends that there should be added to that twelve months an additional six months covered by the document executed on April 15, 1988 entitled "Forbearance Agreement" and reciting that the "forbearance commences" on October 1, 1987 and that the "forbearance ends" on April 1, 1988. The defendant contends that these additional six months should be added as "suspension of the applicable repayment periods", which would make the significant date February 2, 1995, and that the filing in January of 1995 therefore supports a ruling that the debts became due less than 7 years before the bankruptcy filing.

The plaintiff contends that only twelve months of requested deferment should be calculated under the statutory formula, because the third "deferment" was imposed upon him retroactively and not at his request. Therefore, plaintiff maintains, the significant date should be August 2, 1994, which is the original due date plus 7 years plus twelve months for the two requested deferments. Plaintiff avers that any bankruptcy filed after August of 1994 would result in a ruling that the debts first became due more than seven years before the bankruptcy filing.

There is no question that the third deferment request was a retroactive deferment, if it was a deferment at all, inasmuch as the date of the deferment request was April 15, 1988 and the deferment period was from October 1, 1987 to April 1, 1988. See "Forbearance Agreement" dated April 15, 1988, Exhibit No. 6 to Plaintiff's Motion for Summary Judgment (dated and filed Oct. 10, 1995) (Ct.Doc. No. 34). The deferment application was sent by the defendant to the plaintiff after the...