Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-akb-3_06-ap-90058/USCOURTS-akb-3_06-ap-90058-0/pdf.json

Parties Involved:
Key Bank USA, National Association
Plaintiff
Kit Lee Karjala
Defendant

Document Text:

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF ALASKA

In re: Case No. A06-00350-DMD 

KIT LEE KARJALA, 

 

Debtor. 

Chapter 7

KEY BANK USA, NATIONAL

ASSOCIATION,

Plaintiff, 

v.

 

KIT LEE KARJALA, 

Defendant.

Adv. No. A06-90058-DMD

MEMORANDUM REGARDING DISMISSAL

Key Bank has filed a complaint against this chapter 7 debtor seeking to

determine the dischargeability of a state court judgment of $14,495.25. The judgment

represents the outstanding balance on a student loan. The defendant has moved to dismiss

the complaint. She alleges that Key Bank is an improper party plaintiff and that there is no

case or controversy requiring declaratory judgment. I disagree with the defendant. Her

motion to dismiss will be denied.

A chapter 7 discharge does not discharge a debtor from a student loan debt

“unless excepting such debt from discharge . . . would impose an undue hardship on the

Filed On

2/28/07

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1

11 U.S.C. § 523(a)(8).

2

Creditors holding claims arising under 11 U.S.C. § 523(a)(2), (4) or (6) [for money obtained under

false pretenses; fraud, defalcation, or embezzlement; or willful and malicious injury] must file a timely

complaint in the bankruptcy court to except these categories of debt from discharge. See 11 U.S.C. §

523(c)(1); Fed. R. Bankr. P. 4007(c).

3

S.Rep. 989, 95th Cong., 2d Sess. 90 (1978).

4

N. Dakota Bd. of Higher Educ. v. Frech (In re Frech), 62 B.R. 235 (Bankr. D. Minn. 1986).

5

75 B.R. 108 (S.D. Ind. 1987).

6

85 B.R. 579 (D. Kansas 1988).

2

debtor and the debtor’s dependents.”1

 A creditor is not required to bring an action to

determine the dischargeability of student loan debts in bankruptcy court. Unlike other

subsections of § 523(a) which except other kinds of debt from discharge,2

 § 523(a)(8) is selfexecuting. A student loan is not discharged in bankruptcy unless undue hardship is shown.

The debtor argues that because § 523(a)(8) is self-executing, the plaintiff’s

complaint should be dismissed. I disagree. By “self-executing,” Congress simply meant that

a creditor was not required to file a nondischargeability complaint.3

 Creditors may, and do,

file such complaints, however. In one of the three cases cited by the defendant for dismissal,

the nondischargeability complaint was initiated by the creditor.4

 In the two remaining cases,

neither court ruled that a student loan creditor was somehow barred from filing a

dischargeability complaint. In United States v. Bradburn,

5

 the federal district court found

that the government was not required to file a dischargeability complaint in bankruptcy court

prior to suing on the debt. The court nonetheless entered a judgment in favor of the creditor,

the United States. In Buford v. Higher Education Assistance Foundation,

6

 a federal district

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7

Fed. R. Bankr. P. 4007(a).

8

Fed. R. Bankr. P. 4007(b).

9

312 U.S. 270 (1941).

3

court heard an appeal of a bankruptcy court ruling which enjoined a student loan creditor

from collection until it had filed a complaint to determine dischargeability of the debt. The

district court reversed the bankruptcy court decision. It found that the creditor did not have

to file a dischargeability complaint before initiating collection proceedings. These reported

decisions simply do not support the defendant’s position.

The defendant’s position is also contrary to Fed. R. Bankr. P. 4007(a), which

provides that “(a) debtor or any creditor may file a complaint to obtain a determination of the

dischargeability of any debt.”7

 Debtors and creditors alike have standing to be a plaintiff in

an adversary proceeding seeking a determination of the dischargeability of a debt. Except

for § 523(c) actions, the complaint may be filed at any time.8

Finally, the defendant alleges there is no immediate and real case or

controversy here. Again, I disagree. There is a state court judgment for $14,495.25 in favor

of the plaintiff. The defendant has filed a chapter 7 petition. In response, the plaintiff has

filed an action to determine the dischargeability of its debt. This is not a proceeding under

the federal Declaratory Judgment Act. The Supreme Court’s decision in Maryland Casualty

Co. v. Pacific Coal & Oil Co.,

9

 does not apply here.

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For the foregoing reasons, the defendant’s motion to dismiss will be denied.

The defendant will be given 20 days to file an answer to the plaintiff’s complaint. An order

will be entered consistent with this memorandum. 

DATED: February 28, 2007.

BY THE COURT

 /s/ Donald MacDonald IV 

DONALD MacDONALD IV

United States Bankruptcy Judge

Serve: M. Jakubovic, Esq.

C. Johansen, Esq.

P. Gingras, Adv. Case Mgr. - served 2/28/07 – pg.

02/28/07

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