## F I L E D United States Court of Appeals Tenth Circuit 

### SEP 7 2004 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re: CHERYL ANN POLAND,

Debtor.

______________________________ CHERYL ANN POLAND,

Plaintiff-Appellee,

v. EDUCATIONAL CREDIT MANAGEMENT CORPORATION,

Defendant-Appellant, and EQUIFAX ACCOUNTS RECEIVABLE; and TGA, Inc.

Defendants. No. 02-3020

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS (D.C. No. 01-CV-1154-WEB)

Submitted on the briefs: N. Larry Bork of Goodell, Stratton, Edmonds & Palme r, L.L.P., Topeka, Kansas, for Defendant-Appellant.-2-

Garry L. Howard of Slape & Howard, Chartered, Wichi ta, Kansas, for Plaintiff-Appellee.

Before KELLY and BALDOCK , Circuit Judges, and BRORBY , Senior Circuit Judge.

BRORBY , Circuit Judge.

Generally speaking, a Chapter 13 bankruptcy debtor is relieved of her debts following completion of the bankruptcy plan; in oth er words, the debts are discharged. 11 U.S.C. § 1328(a). There are, howev er, exceptions to discharge, including a student-loan debt. Id. §§ 1328(a)(2); 523(a)(8). But there is also an exception to this exception: if excepting a student loan debt from discharge would impose an undue hardship on the debtor and th e debtor’s dependents, the debt will be discharged. Id. § 523(a)(8). In Andersen v. UNIPAC-NEBHELP (In re Andersen) , 179 F.3d 1253 (10th Cir. 1999), we held that, whe re the debtor’s plan contained an express finding of undue hardship, the creditor’s failure to object to confirmation barred its attemp t to collect the debt because the plan with its finding of undue hardship was res jud icata. Unlike the factual scenario in Andersen , it was not established in this bankruptcy that ex cepting the student-loan debt from discharge would impose undue hardship on the debtor.1 After examining the briefs and appellate record, th is panel has determined

unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). T he case is therefore ordered submitted without oral argument. -3- As a result, the debt was not discharged, and, cons equently, we reverse the district court’s order upholding discharge of the debt. 1

Background Ms. Poland filed for Chapter 13 bankruptcy relief i n 1993. Her bankruptcy plan stated that she disputed the validity and amou nt of her student-loan debt and that if a proof of claim was filed on the debt, the debtor would object. It also stated that if no timely proof of claim was filed, “the claim shall be deemed discharged in its entirety upon completion of the P lan.” Aplt. App. at 5. The plan was confirmed. A claim on the student-loan de bt was filed one day after the proof-of-claim filing deadline, and the untimely cl aim was disallowed by the bankruptcy court. Thereafter, the bankruptcy courtentered an order of discharge and final decree in January 1999. There was no app eal from the discharge order. Some time after the discharge order, Educational Cr edit Management Corporation (ECMC), assignee of the student loan de bt, attempted to collect payment on the debt. Ms. Poland then reopened the bankruptcy and filed an adversary proceeding to determine whether the stude nt loan debt had been discharged. The bankruptcy court cited our decision in Andersen as controlling-4-

and held that because the unchallenged plan and dis charge order stated that the student-loan debt was discharged, the issue of disc harge was res judicata. The district court affirmed the bankruptcy court’s decision, also relying on Andersen

. ECMC timely appealed.
Applicability of **In Re Andersen** On appeal, ECMC argues that Andersen is distinguishable and should not control the outcome in this case because here, unli ke in Andersen , there is no language in the plan or discharge order establishin g a finding of undue hardship.
In Andersen , the debtor included the following language in herChapter 13 plan: Pursuant to 11 U.S.C. § 532(a)(8), excepting the af orementioned education loans from discharge will impose an undue hardship on the debtor and the debtor’s dependents. Confirmation o f debtor’s plan shall constitute a finding to that effect and that said debt is dischargeable. 179 F.3d at 1254. The plan was confirmed without t imely objection and the creditor did not appeal the confirmation order. Th e debtor completed all payments under the plan and was granted a discharge . Shortly thereafter, the creditor began requesting payment of the student lo an debt and the debtor reopened her bankruptcy proceeding to determine the dischargeability of the debt. The bankruptcy court in Andersen determined that the student loans were not dischargeable because there was no judicial det ermination of undue hardship. The Bankruptcy Appellate Panel (BAP) reversed. Upo n review by this court, we-5-

acknowledged that “a debtor must normally prove undue hardship by bringing an adversary proceeding directed to that issue,” but w e stated that “[t]he real issue here is not whether [the debtor] properly met her b urden of proving an undue hardship, which she clearly did not, but whether co nfirmation of the plan constitutes a binding adjudication of hardship.” Id. at 1256. Relying on earlier Tenth Circuit precedent we stated: “‘[u]pon becomi ng final, the order confirming a chapter 13 plan represents a binding determinatio n of the rights and liabilities of the parties as ordained by the plan. Absent timelyappeal, the confirmed plan is res judicata and its terms are not subject to collateral attack.’” Id. at 1258-59 (quotingUnited States v. Richman (In re Talbot) , 124 F.3d 1201, 1209 (10th Cir. 1997)). Based on that principle, and given the spe cific plan language, we concluded that “the order of confirmation is res ju dicata as to the issue of hardship.” Id. at 1259. We went on to explain that, contrary to the credito r’s argument, giving res judicata effect to the provision in the plan di d not turn an expressly nondischargeable debt into a dischargeable debt. D istinguishing two cases involving discharge of a tax debt, DePaolo v. United States (In re DePaolo) , 45 F.3d 373 (10th Cir. 1995), and Grynberg v. United States (In re Grynberg) , 986 F.2d 367 (10th Cir. 1993), we explained that Andersen : does not represent an attempt to transform a debt w hich remained nondischargeable throughout the plan period into a dischargeable-6-

debt at the conclusion of the period. Rather, unli ke the tax cases, the finding of undue hardship in the confirmed plan cha nged the nature of the debt into a dischargeable debt

. Id. at 1260 (emphasis added). Because the plan includ ed language that established a finding of undue hardship, the student loan debt had become a dischargeable debt. We concluded by emphasizing th at the Andersen holding did not lessen the debtor’s burden of proof on the issu e of undue hardship, and we limited the holding to the particular facts of thatcase. See id. Though there are many similarities between this cas e now before us and Andersen , there is one all-important difference: this conf irmed plan made no mention of undue hardship, let alone established it s existence. Instead, in this case, the plan stated only the fact, the amount andthe disputed nature of the student loan debt and that if no proof of claim was filed by the creditor, the “claim shall be discharged in its entirety.” Aplt. App. at 5. In affirming the bankruptcy court, the district court indicated thatit did not matter what the plan language or discharge order said, but instead that ECMC failed to timely object: In sum, then, if a creditor fails to make a timely objection ‘it cannot later complain about a certain provision contained in a confirmed plan, even if such a provision is inconsistent withthe Code.’ Andersen , 179 F.3d at 1258. The same reasoning applies with equal force to the plan in the instant case, notwithstand ing the absence of any finding of undue hardship. The plan and discharge order provided for the discharge of the student loans in question. Id. at 69-70.-7-

ECMC argues that the district court in this case is expanding Andersen “so that a plan would not even have to state a premise that, if true, would otherwise allow discharge.” Aplt. Br. at 8. ECMC asserts th at the “plan language on its face doesn’t state a sufficient basis for discharge and therefore the student loan debt should not be discharged.” Id. We agree. Andersen rests on the fact that confirmation of the plan, to which there was no obj ection, amounted to a binding adjudication of undue hardship thereby turning a no ndischargeable debt into a dischargeable debt. Andersen , 179 F.3d at 1260. The district court also held that the res judicata holding of Andersen also applied to the discharge order, which discharged al l debts in the plan except for student loans “in any case in which discharge is gr anted prior to October 1, 1996.” Aplt. App. at 11. Because Poland’s dischar ge was granted after October 1, 1996, the district court held that her s tudent loan was discharged under the language of the order. On appeal, ECMC argues that this language was mistakenly retained in the discharge order even tho ugh it was irrelevant and archaic because the sunset provision to which it re lated was revoked in 1992. Relying on Andersen again, the district court found that because ECMC failed to object to the order, it was now final and ECMC was bound by its provisions. The discharge order cannot, however, be the basis f or discharging the student loan debt for the same reasons that the plan language in this case does not2 The panel is of the view that Andersen was wrongly decided and should be

reconsidered. The unfortunate result of Andersen is that astute attorneys now insert student loan discharge language (after t oday, complete with a finding of undue hardship) into Chapter 13 plans hoping to achieve preclusive effect, notwithstanding: (1) Bankruptcy Code § 528(a)(8) explicitly precludes the discharge of a debtor’s student loan absent a showi ng of undue hardship, (2) Bankruptcy Rules specifically require a success ful adversary proceeding, complete with individualized service of process, to establish undue hardship and discharge a student loan, and (3) lack of required notice under the Bankruptcy Rules proscribes preclusive effect. See In re Banks , 299 F.3d 296, 300-303 (4th Cir. 2002) (Baldock, J., sitting by de signation). -8- establish discharge. Because neither the plan nor the discharge order in this case contain any type of finding of undue hardship, we h old that Andersen does not apply and that the student loan debt is not dischar ged. 2We continue to emphasize, as we did in Andersen , that the proper way to discharge a student loan debt is through an adversary proceeding where the d ebtor establishes undue hardship. Accordingly, the judgment of the distric t court is REVERSED.