October 22, 2019

Student Loan Discharge Case Heard by U.S. Supreme Court

student loanEarlier this month the U.S.  Supreme Court heard arguments in a case involving the question of discharge of student loans in a Chapter 13 case.   The case arose from a Chapter 13 petition filed in 1992 by Francisco Espinoza, an American Airlines baggage handler.

Mr. Espinoza’s story began in 1988.  Sensing that airline baggage handling was not a great long term career, Mr. Espinoza enrolled  in a technical school to learn computer drafting and design, and he financined his education with a student loan.  Unfortunately, he was not able to find a job using his new education and he found himself in a financial bind when American Airlines froze wages and reduced his hours.

By 1992, Mr. Espinoza found himself living paycheck to paycheck and unable to pay down his $13,000 student loan.  At that point, he contacted a lawyer and filed a Chapter 13 bankruptcy.   The Chapter 13 plan prepared by Mr. Espinoza’s lawyer provided for full payment of the balance due on the student loan over the term of the plan but it did not provide for payment of $4,000 in accrued interest or for future interest.

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