In re Lee
| Decision Date | 27 February 1987 |
| Docket Number | Bankruptcy No. A84-04621,86-0347A and 86-0345A.,A85-01303,Adv. No. 86-0346A,A86-02396 and A86-03497,A85-00211 |
| Citation | 71 BR 833 |
| Parties | In re David G. LEE and Carole A. Lee, Debtors. UNITED STATES of America, Plaintiff, v. David G. LEE and Carole A. Lee, and Robert L. Coley, Trustee, Defendants. In re Paul M. LEVINE, Debtor. UNITED STATES of America, Plaintiff, v. Paul M. LEVINE, Defendant. In re Jerry Irwin HOCHMAN, Debtor. UNITED STATES of America, Plaintiff, v. Jerry Irwin HOCHMAN and Robert L. Coley, Trustee, Defendants. In re William J. SCHNEIDER, Debtor. In re Michelle ALEXANDER, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
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Rose H. Staples, Paul C. Parker & Associates, Decatur, Ga., for David G. Lee and Carole A. Lee.
J.D. Roy Atchison, Asst. U.S. Atty., Atlanta, Ga., for U.S. in Nos. A84-04621, A86-02396 and A86-03497.
Herbert E. Heitman, Atlanta, Ga., for Paul M. Levine.
J. William Boone, Asst. U.S. Atty., Atlanta, Ga., for U.S. in No. A85-00211.
Jonathan I. Sbar, Jonathan I. Sbar, P.C., Atlanta, Ga., for Jerry Irwin Hochman.
Myles E. Eastwood, Asst. U.S. Atty., Atlanta, Ga., for U.S. in No. A85-01303.
Richard B. Herzog, Jr., Bisbee, Parker & Rickertsen, Atlanta, Ga., for William J. Schneider.
Kenneth Mitchell, Giddens, Davidson, Mitchell & Eaton, Atlanta, Ga., for Michelle Alexander.
Presently pending before the Court are objections to the above-styled debtors' inclusion of Health Education Assistance Loans ("HEAL") in their Chapter 13 composition plans, filed by plaintiff, the United States of America, on behalf of its agency the Department of Health & Human Services ("HHS").1 In several of the underlying adversary proceedings, HHS also filed complaints to revoke dischargeability of these loans.
Due to the similarity of factual and legal issues in these proceedings and other adversary proceedings and cases before this Court, a joint hearing was conducted on the question of dischargeability of HEAL loans. This hearing was held on September 22, 1986 and at that time counsel for HHS confirmed that the issue of good faith and the motions to vacate confirmation order would be withdrawn. The issue before the Court is whether 42 U.S.C. Section 294f(g) (1982) controls the dischargeability of HEAL loans in Chapter 13 or whether 11 U.S.C. Section 1328 (1982) is the governing statutory provision. Based upon the following analysis, the HHS complaint to determine HEAL loans to be nondischargeable by a Chapter 13 composition plan is denied.
The following facts are undisputed as stipulated by the parties. See Stipulation, June 13, 1986. David Lee was granted HEAL loans in the sum of $1,500, $5,750, and $8,500 on February 26, 1982, June 26, 1982 and March 7, 1983 respectively. Debtor Carole Lee was granted a HEAL loan on September 29, 1982 in the sum of $8,000. Both debtors graduated from Life Chiropractic College on December 17, 1983, and repayment on the notes was to begin October 1, 1984. See Government Exhibits A, B, C, and D, attached to complaint.
Debtors defaulted and filed a joint petition under Chapter 13 of the Bankruptcy Code on October 9, 1984. Chase Manhattan Bank, who originated part of the loans, was listed on debtors' schedules and received notice of the creditors' meeting. HHS did not receive notice of this case since they were not scheduled as a creditor. See Order and Notice for Meeting of Creditors, page 2. On November 23, 1984, Chase Manhattan Bank filed an insurance claim with HHS on David Lee's HEAL loan note. Exhibit E. They assigned their claim to HHS. Exhibit C, page 2. On November 30, 1984, the bank filed a proof of claim against David Lee. HHS paid the insurance claim on December 3, 1984. Exhibit H. Debtors' thirty-six month, twenty (20%) percent composition plan was confirmed by Order of January 29, 1985. No appeal was taken from the Order of Confirmation which is a final order.
The Student Loan Marketing Association, Sallie Mae, purchased Carole Lee's note from First American Bank on October 18, 1982 and filed an insurance claim with HHS on Carole Lee's loan on March 1, 1985. Exhibit I. Sallie Mae filed a proof of claim on March 11, 1985. HHS paid the insurance claim and received an assignment of the note. Exhibits J, K. HHS claims David Lee is indebted to it in the amount of $10,604.85 plus interest, as of February 28, 1985 and Carole Lee in the amount of $10,524 plus interest. Exhibits H, K (HHS certificates of indebtedness). On March 11, 1986, HHS filed a motion to vacate confirmation order and to modify plan to exclude HEAL loan as well as a complaint to revoke dischargeability.
Defendant-debtor Paul Levine obtained a HEAL loan, in order to attend Life Chiropractic College, on January 3, 1983 in the sum of $12,500. Sallie Mae purchased debtor's note from the First Virginia Bank on January 17, 1983. See Government Exhibits A, B and C. Payments on the note were to commence June 1, 1984. Exhibit E (certificate of indebtedness). Debtor defaulted on this loan as no payments were made. On January 16, 1985, debtor filed a joint voluntary petition under Chapter 13. In his Chapter 13 Statement, debtor listed an indebtedness to First American Bank, who originated the loan, representing the HEAL loan in the sum of $12,000. HHS received no notice of the pending Chapter 13 case prior to confirmation. See Order and Notice for Meeting of Creditors, page 2.
Sallie Mae filed a proof of claim in this case on March 11, 1985 claiming an indebtedness of $16,455.82. Debtor proposed a thirty-six month, one (1%) percent composition plan. Neither HHS nor Sallie Mae appeared or opposed the confirmation of this plan. On May 28, 1985, the plan was duly confirmed by the Court and no appeal was taken by any party.
HHS paid Sallie Mae's insurance claim in the amount of $16,982 on June 18, 1985 and received an assignment of the note. Exhibits D, E. On March 11, 1986, nine months after confirmation, HHS simultaneously filed a motion to vacate confirmation order and to modify plan to exclude HEAL loan and the underlying adversary complaint to revoke dischargeability of HEAL loan.
Debtor obtained HEAL loans in the amount of $5,903 and $7,624 on June 3, 1982 and November 26, 1982, respectively, in order to attend Life Chiropractic College. Exhibits C, D. Sallie Mae purchased debtor's notes from Chase Manhattan Bank, who originated the loans, on May 2, 1983. See Proof of Claim. Repayment was to commence on January 1, 1984. Debtor defaulted on the loans as only $95.52 in payments were made during three successive forbearance periods until May 31, 1985. Exhibit G (certificate of indebtedness). On March 13, 1985 debtor filed a voluntary joint petition under Chapter 13. In his Chapter 13 Statement debtor listed an indebtedness to "S.L.R.C. for HEAL Loan" for $17,300.94.
Sallie Mae filed a proof of claim on May 24, 1985 for $18,778.11. HHS had paid Sallie Mae's insurance claim on May 15, 1985 for $18,630 and received an assignment of the note. Exhibits G, H. Debtor proposed an amended thirty-six month, eleven (11%) percent composition plan. Sallie Mae was served with a notice of rescheduled hearing on confirmation of plan on June 5, 1985. Neither HHS nor Sallie Mae appeared or opposed confirmation of this plan. On July 17, 1985, the plan was duly confirmed by the Court and no appeal was taken. On March 11, 1986, some eight months later, HHS simultaneously filed a motion to vacate confirmation order and to modify debtor's plan to exclude HEAL loans and a complaint to revoke dischargeability.
Debtor obtained two HEAL loans in the sum of $9,000 and $6,316 on September 29, 1982 and August 1, 1983, respectively, in order to attend Life Chiropractic College. Sallie Mae purchased debtor's notes from First American Bank, who originated the loans, on October 18, 1982. Repayment was to commence on January 1, 1986 after several forbearance periods. Debtor defaulted on these loans as no payments were made by him. See Declaration of John F. Haczewski, attached to HHS proof of claim. On March 31, 1986, debtor filed a voluntary petition under Chapter 13. In his Chapter 13 Statement, debtor listed an indebtedness to the Student Loan Repayment Center in Merrifield, Virginia for his HEAL loan in the sum of $21,640. Sallie Mae filed a proof of claim on June 2, 1986. HHS paid an insurance claim filed by Sallie Mae on June 6, 1986, and received an assignment of the note. On October 1, a Notice and Order was filed reciting that these notes had been assigned by Sallie Mae to HHS. HHS filed a proof of claim on September 5, 1986, for $22,768. Debtor proposed an amended sixty month, twelve (12%) percent composition plan, filed September 19, 1986. HHS filed an objection to confirmation of plan on September 11, 1986. According to debtor's response to HHS' objection, debtor graduated and practiced from July 1984 until November 1985. Chapter 13 Statement, paragraph 2(e), page 3.
Debtor obtained HEAL loans in the sum of $5,650, $6,365 and $10,000 on August 30, 1979, June 24, 1980 and August 17, 1981 respectively, in order to attend the School of Veterinary Medicine at Tuskegee Institute. Though she was later dropped from that school for academic reasons, debtor graduated from Howard University with a journalism degree on May 12, 1984. Sallie Mae purchased debtor's notes from Chase Manhattan Bank who originated the loans. Repayment was to commence on March 15, 1985, after three deferments, but debtor was granted a six-month forbearance until September 1, 1985. Debtor defaulted on the loans and allegedly made two payments to Sallie Mae. On May 9, 1986, debtor filed a voluntary petition under Chapter 13. In her ...
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