Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-04-00015/USCOURTS-ca10-04-00015-0/pdf.json

Parties Involved:
Dean Alan Boyer
Appellee
Karla Joy Boyer
Appellee
Educational Credit Management Corporation
Appellant

Document Text:

* This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and collateral estoppel. 10th Cir. BAP

L.R. 8018-6(a).

1 28 U.S.C. § 158(a)(1); Fed. R. Bankr. P. 8002(a).

FILED

U.S. Bankruptcy Appellate Panel

of the Tenth Circuit

December 14, 2004

Barbara A. Schermerhorn

Clerk NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE DEAN ALAN BOYER and

KARLA JOY BOYER,

Debtors.

BAP No. KS-04-015

EDUCATIONAL CREDIT

MANAGEMENT CORPORATION,

Plaintiff – Appellant,

Bankr. No. 96-42993-13

Adv. No. 02-7141

 Chapter 13

v. ORDER AND JUDGMENT*

DEAN ALAN BOYER and KARLA

JOY BOYER,

Defendants – Appellees.

Appeal from the United States Bankruptcy Court

for the District of Kansas

Before CORNISH, MICHAEL, and THURMAN, Bankruptcy Judges.

CORNISH, Bankruptcy Judge.

Educational Credit Management Corporation (ECMC) timely appeals a

final Judgment entered by the United States Bankruptcy Court for the District of

Kansas declaring, in relevant part, certain portions of the debtors’ student loan

debt to be discharged pursuant to a provision in their confirmed Chapter 13 Plan.1

The parties have consented to this Court’s jurisdiction because they have not

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 1 of 7
2 28 U.S.C. § 158(b)-(c); Fed. R. Bankr. P. 8001(e).

3 Chapter 13 Plan at 2, Appellant’s Appendix at 54.

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elected to have the appeal heard by the United States District Court for the

District of Kansas.2

 For the reasons stated below, the bankruptcy court’s

Judgment is REVERSED and the matter is REMANDED.

I. Background

The debtors filed a Chapter 13 petition in 1996. They scheduled ECMC’s

predecessor in interest (who will be referred to as “ECMC”) as a creditor holding

a general unsecured claim for unpaid student loans. 

The Chapter 13 Plan proposed by the debtors contained the following

relevant provisions: 

THE PROVISIONS OF THIS PLAN ALTER CONTRACTS AND

LEGAL RELATIONSHIPS PREVIOUSLY EXISTING. 

PERSONS AFFECTED ARE ADVISED TO SEEK LEGAL

ADVICE IF THEY DO NOT AGREE OR DO NOT

UNDERSTAND THE PROVISIONS OF THIS WHOLE PLAN.

. . . .

Student Loan creditors will be paid the remaining unpaid original

principal amount of any claim next from any funds paid the trustee

during the plan. During the pendency of the Bankruptcy Proceeding,

no interest or penalties will accrue on these debts or claims. All such

debts other than the remaining unpaid original principal amount of

the loans remaining unpaid upon completion of the plan will be

discharged upon entry of any discharge hereunder.

If the funds so paid do not repay the remaining unpaid original

principal amount of any such debts, then the remaining unpaid

original principal will be repaid by the debtor over a period of ten

years after discharge at the then current interest rate for student

loans.3

 

Accordingly, through this provision, the debtors proposed to discharge prepetition

interest on their student loans, and any interest or penalties that accrued on that

debt during their Chapter 13 case (collectively, the “Interest”). Despite the

debtors’ proposal to discharge the Interest through the confirmation of their Plan,

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 2 of 7
4 All future statutory references in the text are to title 11 of the United States

Code. Section 523(a)(8) states that student loan debt is excepted from discharge,

unless doing so “will impose an undue hardship on the debtor and the debtor’s

dependents.” 11 U.S.C. § 523(a)(8); see Fed. R. Bankr. P. 4007(a)-(b) & 7001(6)

(adversary proceeding necessary to determine the dischargeability of a debt, and

the debtor may file a complaint to commence such a proceeding at any time).

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not by a judgment pursuant to 11 U.S.C. § 523(a)(8),4 ECMC did not object to

confirmation of this Plan. In May, 1997, the bankruptcy court entered an Order

confirming the debtors’ Plan (Confirmation Order). ECMC did not appeal the

Confirmation Order.

In July, 1997, ECMC filed a proof claim in the debtors’ case, asserting a

general unsecured claim in the total amount of $33,724.90. Of this amount,

$26,694.09 was claimed as principal (Principal Debt). The debtors objected to

ECMC’s proof of claim, arguing that it was not supported by proper

documentation. ECMC amended its proof of claim, reducing its claim for

Interest, but it never filed a pleading responding to the debtors’ claim objection. 

Thus, being unopposed, the bankruptcy court entered an Order sustaining the

debtors’ claim objection (Claim Order). Although the claim objection only

requested that ECMC’s proof of claim be disallowed, the Claim Order prepared

by the debtors’ counsel states that the entire student loan debt reflected in the

proof of claim was discharged. This Claim Order, therefore, is broader than the

Confirmation Order in that it purports to discharge both the student loan Principal

Debt and Interest.

The debtors completed all payments under their confirmed Plan. Because

ECMC’s claim was disallowed by the Claim Order, it received no payments

through the debtors’ confirmed Plan. 

In May, 2001, the bankruptcy court entered a “Discharge Order,” granting

the debtors a discharge pursuant to § 1328(a). The Discharge Order discharged

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 3 of 7
5 The Discharge Order states:

1. Pursuant to 11 U.S.C. Section 1328(a) the debtor is discharged

from all debts provided for by the plan or disallowed under 11

U.S.C. Section 502, except any debt:

. . . .

(c) for a student loan . . . as specified in 11 U.S.C. Section

523(a)(8) in any case in which discharge is granted prior

to October 1, 1996[.]

Discharge Order at 1, quoted in Educ. Credit Mgmt. Corp. v. Boyer (In re Boyer), 305 B.R. 42, 55 (Bankr. D. Kan. 2004). As discussed by the bankruptcy court,

this language arose from a prior version of § 523(a)(8) and was included in the

form order generated by the clerk of court by mistake. Id.

6 Federal Rule of Civil Procedure 60(b) is made applicable in bankruptcy

cases by Federal Rule of Bankruptcy Procedure 9024.

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the debtors’ student loan debt in its entirety.5 This form Order is not in accord

with the version of § 523(a)(8) applicable in the debtors’ case requiring their

entire student loan debt to be excepted from discharge, and it also contradicts the

Confirmation Order, which only discharged the debtors’ student loan Interest.

Subsequently, ECMC commenced an adversary proceeding against the

debtors, seeking a determination as to the dischargeability of the debtors’ student

loan debt. It alleged that the debt was not discharged by the Claim Order, and it

requested that the Claim Order be amended pursuant to Federal Rule of Civil

Procedure 60(b)(4) or (b)(6).6

 The debtors, in turn, asserted that the subsequent

Discharge Order discharged the student loans in their entirety. ECMC then filed a

motion to amend the Claim Order and/or the Discharge Order and a Motion for

Summary Judgment. In these papers, it argued that the discharge provision in the

debtors’ confirmed Plan did not apply to the Principal Debt. ECMC also alleged

that the Interest was not discharged by the confirmed Plan because the debtors did

not obtain a judgment under § 523(a)(8). The debtors opposed ECMC’s Motions. 

The bankruptcy court entered Judgement in favor of ECMC in part, and in

favor of the debtors in part. It held that the student loan Principal Debt, plus

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 4 of 7
7 Boyer, 305 B.R. at 42. This Memorandum and Order contains findings of

fact and conclusions of law related to the Judgment entered in the debtors’ case,

as well the Judgments entered in three other Chapter 13 cases involving similar

facts and issues. In re Seiwert, Bankr. No. 96-43032-13 (Bankr. D. Kan.); Educ.

Credit Mgmt. Corp. v. Nelson (In re Nelson), Bankr. No. 98-41327-13, Adv. No.

03-7025 (Bankr. D. Kan.); In re Mersmann, Bankr. No. 98-41940-13 (Bankr. D.

Kan.) [hereinafter referred to collectively as the “Related Debtor Cases”]. 

8 179 F.3d 1253 (10th Cir. 1999).

9 ECMC also appealed the Judgment entered by the bankruptcy court in each

of the Related Debtor Cases. The bankruptcy court’s Judgment in two of the

Related Debtor Cases is reversed for the same reasons stated in this Order and

Judgment. In re Seiwert, BAP No. KS-04-016 (10th Cir. BAP filed Dec. 14,

2004); Educ. Credit Mgmt. Corp. v. Nelson (In re Nelson), __ B.R. __, BAP No.

KS-04-017 (10th Cir. BAP filed Dec. 14, 2004). In the third Related Debtor

(continued...)

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post-discharge interest, was not discharged, but that the Interest was discharged. 

The bankruptcy court’s Judgment is supported by separate findings of fact and

conclusions of law, set forth in a Memorandum and Order.7

 

In its Memorandum and Order, the bankruptcy court held that the Principal

Debt was excepted from discharge under § 523(a)(8) because the debtors had not

obtained a “hardship discharge” under that section, and the discharge provision in

the debtors’ confirmed Plan did not apply to the Principal Debt. It refused to

enforce the Claims Order and the Discharge Order to the extent that they stated

that the Principal Debt was discharged. The Interest, however, was excepted from

discharge pursuant to the terms of the debtors’ confirmed Plan, even though they

did not obtain a judgment against ECMC pursuant to § 523(a)(8). The bankruptcy

court held that under Andersen v. UNIPAC-NEBHELP (In re Andersen),

8

 ECMC

could not collaterally attack the final Confirmation Order that discharged the

Interest when the debtors completed their Plan payments. It did not address the

discharge of the Interest pursuant to the Claim Order and the Discharge Order

because the Confirmation Order controlled, and its discharge of the Interest did

not conflict with those Orders, both of which discharged the student loan debt.

ECMC appealed the bankruptcy court’s Judgment.9

 The debtors did not

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 5 of 7
9 (...continued)

Case, In re Mersmann, we have entered an Opinion affirming the bankruptcy

court’s Judgment. __ B.R. __, BAP No. KS-018 (10th Cir. BAP filed Dec. 14,

2004). Unlike this case or the other two Related Debtor Cases, the discharge

clause in the confirmed plan in Mersmann contained a “finding of undue

hardship” and, therefore, under Andersen, 179 F.3d at 1256, that finding was

binding on ECMC. See Poland v. Educ. Credit Mgmt. Corp. (In re Poland), 382

F.3d 1185, 1189 (10th Cir. 2004) & discussion infra.

10 As such we need not, and cannot, address the propriety of the bankruptcy

court’s decision refusing to enforce the provisions of the Claim Order and the

Discharge Order as they relate to the Principal Debt.

11 __ B.R. __, BAP No. KS-04-017, Slip Op. at 5-8; accord Seiwert, BAP No.

KS-04-016, Slip. Op. at 6.

12 382 F.3d 1185 (10th Cir. 2004). 

13 11 U.S.C. § 523(a)(8); Fed. R. Bankr. P. 4007(a)-(b) & 7001(6); Poland, 382 F.3d at 1189 (adversary proceeding required, and debtor has burden to prove

“undue hardship”); Andersen, 179 F.3d at 1256 (same); Mersmann, __ B.R. __,

BAP No. KS-04-018, Slip. Op. at 5-6 (same); see generally Educ. Credit Mgmt.

Corp. v. Polleys (In re Polleys), 356 F.3d 1302 (10th Cir. 2004) (discussing

elements of “undue hardship”); In re Woodcock, 45 F.3d 363 (10th Cir. 1995)

(debtor has burden to prove “undue hardship”); Alderete v. Educ. Credit Mgmt.

(continued...)

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appeal the portions of the bankruptcy court’s Judgment adverse to them.10 The

only issue before this Court is whether the bankruptcy court erred in discharging

the student loan Interest.

II. Discussion

For the same reasons stated in Educational Credit Management Corp. v.

Nelson (In re Nelson),

11 the portion of the bankruptcy court’s Judgment declaring

the student loan Interest to be discharged under the debtors’ confirmed Plan must

be reversed in light of Poland v. Educational Credit Management Corp. (In re

Poland).

12 The debtors’ confirmed Plan contains no “finding of undue hardship”

and, therefore, it does not discharge the student loan Interest. The debtors can

only obtain a discharge of their student loan debt by commencing an adversary

proceeding against ECMC under § 523(a)(8), and proving that payment of that

debt will impose an “undue hardship” on them and their dependents.13 

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 6 of 7
13 (...continued)

Corp. (In re Alderete), 308 B.R. 495 (10th Cir. BAP 2004) (discussing elements

of “undue hardship,” and debtor has burden of showing by preponderance of the

evidence).

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While the student loan Interest was not discharged by the debtors’

confirmed Plan as a matter of law under Poland, we note that the Claim Order and

the Discharge Order state that the debtors’ entire student loan debt, including the

Interest, is discharged. Although ECMC challenged these discharge provisions

below, requesting in its Complaint and in subsequent motions that both Orders be

altered or amended to except the Interest from discharge, the bankruptcy court did

not rule on ECMC’s request for judgment or motions because it had concluded

that the Interest was discharged pursuant to the confirmed Plan. We therefore

remand this matter to the bankruptcy court to address ECMC’s challenge of the

discharge of Interest in the Claim Order and the Discharge Order. 

III. Conclusion

The bankruptcy court’s Judgment is REVERSED, and the case is

REMANDED to the bankruptcy court for further proceedings consistent with this

Order and Judgment.

BAP Appeal No. 04-15 Docket No. 59 Filed: 12/14/2004 Page: 7 of 7