Source: https://www.law.cornell.edu/supct/html/08-1134.ZO.html
Timestamp: 2019-04-20 20:32:55+00:00

Document:
UNITED STUDENT AID FUNDS, INC., PETITIONER v.
<tab>Justice Thomas delivered the opinion of the Court.
Under Chapter 13 of the Bankruptcy Code (Code), a debtor may obtain a discharge of certain government-sponsored student loan debts only if failure to discharge that debt would impose an “undue hardship” on the debtor and his dependents. 11 U. S. C. §§523(a)(8). The Federal Rules of Bankruptcy Procedure require bankruptcy courts to make this undue hardship determination in an adversary proceeding, see Rule 7001(6), which the party seeking the determination must initiate by serving a summons and complaint on his adversary, see Rules 7003, 7004, 7008. The debtor in this case filed a plan with the Bankruptcy Court that proposed to discharge a portion of his student loan debt, but he failed to initiate the adversary proceeding as required for such discharge. The creditor received notice of, but did not object to, the plan, and failed to file an appeal after the Bankruptcy Court subsequently confirmed the plan. Years later, the creditor filed a motion under Federal Rule of Civil Procedure 60(b)(4) asking the Bankruptcy Court to rule that its order confirming the plan was void because the order was issued in violation of the Code and Rules. We granted certiorari to resolve a disagreement among the Courts of Appeals as to whether an order that confirms the discharge of a student loan debt in the absence of an undue hardship finding or an adversary proceeding, or both, is a void judgment for Rule 60(b)(4) purposes.
Between 1988 and 1989, respondent Francisco Espinosa obtained four federally guaranteed student loans for a total principal amount of $13,250. In 1992, Espinosa filed a bankruptcy petition under Chapter 13. That Chapter permits individual debtors to develop a plan to repay all or a portion of their debts over a period of time specified in the plan. See Nobelman v. American Savings Bank , 508 U. S. 324, 327 (1993) ; see also §§301(a), 1321; Fed. Rule Bkrtcy. Proc. 3015(b). A proposed bankruptcy plan becomes effective upon confirmation, see §§1324, 1325, and will result in a discharge of the debts listed in the plan if the debtor completes the payments the plan requires, see §1328(a).
As the Federal Rules of Bankruptcy Procedure require, the clerk of the Bankruptcy Court mailed notice and a copy of Espinosa’s plan to petitioner United Student Aid Funds, Inc. (United), the creditor to whom Espinosa owed the student loan debt. 1 Id., at 34; see Rules 2002(b), (g)(2), 3015(d). In boldface type immediately below the caption, the plan stated: “WARNING IF YOU ARE A CREDITOR YOUR RIGHTS MAY BE IMPAIRED BY THIS PLAN.” Id., at 23. The plan also noted the deadlines for filing a proof of claim or an objection to the plan. Id., at 26–27.
In May 1993, the Bankruptcy Court confirmed Espinosa’s plan without holding an adversary proceeding or making a finding of undue hardship. One month later, the Chapter 13 trustee mailed United a form notice stating that “[t]he amount of the claim filed differs from the amount listed for payment in the plan” and that “[y]our claim will be paid as listed in the plan.” Id., at 44 . The form also apprised United that if United “wishe[d] to dispute the above stated treatment of the claim,” it had the “responsibility” to notify the trustee within 30 days. Ibid. United did not respond to that notice.
In 2000, the United States Department of Education commenced efforts to collect the unpaid interest on Espinosa’s student loans. 3 In response, Espinosa filed a motion in 2003 asking the Bankruptcy Court to enforce its 1997 discharge order by directing the Department and United to cease all efforts to collect the unpaid interest on his student loan debt.
“A judgment is not void,” for example, “simply because it is or may have been erroneous.” Hoult v. Hoult , 57 F. 3d 1, 6 (CA1 1995); 12 J. Moore et al., Moore’s Federal Practice §60.44[a], pp. 60–150 to 60–151 (3d ed. 2007) (hereinafter Moore’s). Similarly, a motion under Rule 60(b)(4) is not a substitute for a timely appeal . Kocher v. Dow Chemical Co. , 132 F. 3d 1225, 1229 (CA8 1997); see Moore’s §60.44[a], at 60–150. Instead, Rule 60(b)(4) applies only in the rare instance where a judgment is premised either on a certain type of jurisdictional error or on a violation of due process that deprives a party of notice or the opportunity to be heard. See United States v. Boch Oldsmobile, Inc., 909 F. 2d 657, 661 (CA1 1990); Moore’s §60.44[a]; 11 C. Wright, A. Miller, & M. Kane, Federal Practice & Procedure §2862, p. 331 (2d ed. 1995 and Supp. 2009); cf. Chicot County Drainage Dist. v. Baxter State Bank , 308 U. S. 371, 376 (1940) ; Stoll v. Gottlieb , 305 U. S. 165, 171–172 (1938) . The error United alleges falls in neither category.
Federal courts considering Rule 60(b)(4) motions that assert a judgment is void because of a jurisdictional defect generally have reserved relief only for the exceptional case in which the court that rendered judgment lacked even an “arguable basis” for jurisdiction. Nemaizer v. Baker , 793 F. 2d 58, 65 (CA2 1986); see, e.g. , Boch Oldsmobile, supra , at 661–662 (“[T]otal want of jurisdiction must be distinguished from an error in the exercise of jurisdiction, and … only rare instances of a clear usurpation of power will render a judgment void” (brackets and internal quotation marks omitted)).
This case presents no occasion to engage in such an “arguable basis” inquiry or to define the precise circumstances in which a jurisdictional error will render a judgment void because United does not argue that the Bankruptcy Court’s error was jurisdictional. Reply Brief for Petitioner 5, 11. Such an argument would fail in any event. First, §523(a)(8)’s statutory requirement that a bankruptcy court find undue hardship before discharging a student loan debt is a precondition to obtaining a discharge order, not a limitation on the bankruptcy court’s jurisdiction. See, e.g. , Arbaugh v. Y & H Corp. , 546 U. S. 500, 515–516 (2006) . Second, the requirement that a bankruptcy court make this finding in an adversary proceeding derives from the Bankruptcy Rules, see Rule Proc. 7001(6), which are “procedural rules adopted by the Court for the orderly transaction of its business” that are “not jurisdictional.” Kontrick v. Ryan , 540 U. S. 443, 454 (2004) (internal quotation marks omitted).
Espinosa’s failure to serve United with a summons and complaint deprived United of a right granted by a procedural rule. See Fed. Rule Bkrtcy. Proc. 7004(b)(3). United could have timely objected to this deprivation and appealed from an adverse ruling on its objection. But this deprivation did not amount to a violation of United’s constitutional right to due process. Due process requires notice “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co ., 339 U. S. 306, 314 (1950) ; see also Jones v. Flowers , 547 U. S. 220, 225 (2006) (“[D]ue process does not require actual notice . . .”). Here, United received actual notice of the filing and contents of Espinosa’s plan. This more than satisfied United’s due process rights. Accordingly, on these facts, Espinosa’s failure to serve a summons and complaint does not entitle United to relief under Rule 60(b)(4).
Unable to demonstrate a jurisdictional error or a due process violation, United and the Government, as amicus , urge us to expand the universe of judgment defects that support Rule 60(b)(4) relief. Specifically, they contend that the Bankruptcy Court’s confirmation order is void because the court lacked statutory authority to confirm Espinosa’s plan absent a finding of undue hardship. In support of this contention, they cite the text of §523(a)(8), which provides that student loan debts guaranteed by governmental units are not dischargeable “ unless ” a court finds undue hardship. 11 U. S. C. §523(a)(8) (emphasis added). They argue that this language imposes a “ ‘self-executing’ limitation on the effect of a discharge order” that renders the order legally unenforceable, and thus void, if it is not satisfied. Brief for Petitioner 23–24; Brief for United States as Amicus Curiae 18 (quoting Tennessee Student Assistance Corporation v. Hood , 541 U. S. 440, 450 (2004) ). In addition, United cites §1325(a)(1), which instructs bankruptcy courts to confirm only those plans that comply with “the … applicable provisions” of the Code. Reading these provisions in tandem, United argues that an order confirming a plan that purports to discharge a student loan debt without an undue hardship finding is “doubly beyond the court’s authority and therefore void.” Brief for Petitioner 13.
Given the Code’s clear and self-executing requirement for an undue hardship determination, the Bankruptcy Court’s failure to find undue hardship before confirming Espinosa’s plan was a legal error. See Part III, infra . But the order remains enforceable and binding on United because United had notice of the error and failed to object or timely appeal.
United’s response—that it had no obligation to object to Espinosa’s plan until Espinosa served it with the summons and complaint the Bankruptcy Rules require, Brief for Petitioner 33—is unavailing. Rule 60(b)(4) does not provide a license for litigants to sleep on their rights. United had actual notice of the filing of Espinosa’s plan, its contents, and the Bankruptcy Court’s subsequent confirmation of the plan. In addition, United filed a proof of claim regarding Espinosa’s student loan debt, thereby submitting itself to the Bankruptcy Court’s jurisdiction with respect to that claim. See Langenkamp v. Culp , 498 U. S. 42, 44 (1990) (per curiam) . United therefore forfeited its arguments regarding the validity of service or the adequacy of the Bankruptcy Court’s procedures by failing to raise a timely objection in that court.
We are mindful that conserving assets is an important concern in a bankruptcy proceeding. We thus assume that, in some cases, a debtor and creditor may agree that payment of a student loan debt will cause the debtor an undue hardship sufficient to justify discharge. In such a case, there is no reason that compliance with the undue hardship requirement should impose significant costs on the parties or materially delay confirmation of the plan. Neither the Code nor the Rules prevent the parties from stipulating to the underlying facts of undue hardship, and neither prevents the creditor from waiving service of a summons and complaint. See Fed. Rule Bkrtcy. Proc. 7004; Fed. Rule Civ. Proc. 4(k). But, to comply with §523(a)(8)’s directive, the bankruptcy court must make an independent determination of undue hardship before a plan is confirmed, even if the creditor fails to object or appear in the adversary proceeding. See supra , at 12.
We acknowledge the potential for bad-faith litigation tactics. But expanding the availability of relief under Rule 60(b)(4) is not an appropriate prophylaxis. As we stated in Taylor v. Freeland & Kronz , 503 U. S. 638 (1992) , “[d]ebtors and their attorneys face penalties under various provisions for engaging in improper conduct in bankruptcy proceedings,” id ., at 644; see Fed. Rule Bkrtcy. Proc. 9011. The specter of such penalties should deter bad-faith attempts to discharge student loan debt without the undue hardship finding Congress required. And to the extent existing sanctions prove inadequate to this task, Congress may enact additional provisions to address the difficulties United predicts will follow our decision.
1 United is a guaranty agency that administers the collection of federally guaranteed student loans in accordance with regulations promulgated by the United States Department of Education. See, e.g., 34 CFR §682.200 et seq. (2009).
2 The discharge order contained an apparent clerical error that the courts below considered and addressed in adjudicating these proceedings. See n. 4, infra.
3 After Espinosa completed payments under the plan, United assigned Espinosa’s loans to the Department under a reinsurance agreement. After these proceedings began, United requested and received a recall of the loans from the Department. App. to Pet. for Cert. 63.
4 The one-page discharge order contained a paragraph that purported to exclude “ ‘any debt … for a student loan’ ” from the discharge. 530 F. 3d 895, 896 (CA9 2008). That provision appeared irreconcilable with the confirmation order, which contemplated the discharge of the interest on Espinosa’s student loan debt. Suggesting that the Bankruptcy Court may have automatically generated the discharge order without tailoring it to the terms of the confirmation order, the Court of Appeals remanded the case to the Bankruptcy Court to consider amending the discharge order to conform to the confirmation order. Id., at 899; see Fed. Rule Civ. Proc. 60(a) (authorizing a court to “correct a clerical mistake or a mistake arising from oversight or omission”). On remand, the Bankruptcy Court found that the text of its discharge order excepting Espinosa’s student loan debt from discharge “was inserted because of a clerical mistake” and struck that language from the order. App. 48. Although certain amici press the point, United has not challenged the substance of the Bankruptcy Court’s amendment to the order or asked us to consider whether such amendment was proper under Rule 60(a). See Brief for Petitioner 42; Reply Brief for Petitioner 20. Thus, we express no view on those issues. See Kamen v. Kemper Financial Services, Inc., 500 U. S. 90 , n. 4 (1991) (noting that “we do not ordinarily address issues raised only by amici”).
5 In so doing, the Court of Appeals disagreed with two other Courts of Appeals. See In re Mersmann, 505 F. 3d 1033, 1047–1049 (CA10 2007) (en banc); Whelton v. Educational Credit Management Corp., 432 F. 3d 150, 154 (CA2 2005).
6 Three Courts of Appeals have reached the opposite conclusion on similar facts. See In re Ruehle, 412 F. 3d 679, 682–684 (CA6 2005); In re Hanson, 397 F. 3d 482, 486 (CA7 2005); In re Banks, 299 F. 3d 296, 302–303 (CA4 2002).
8 Because United brought this action on a motion for relief from judgment under Rule 60(b)(4), our holding is confined to that provision. We express no view on the terms upon which other provisions of the Bankruptcy Rules may entitle a debtor or creditor to postjudgment relief.
9 Subject to certain exceptions, Bankruptcy Rule 9024 makes Rule 60(b) applicable to Chapter 13 proceedings. One such exception provides that “a complaint to revoke an order confirming a plan may be filed only within the time allowed by” 11 U. S. C. §1330. Fed. Rule Bkrtcy. Proc. 9024. Section 1330(a) imposes a 180-day time limit for a party to seek revocation of a confirmation order “procured by fraud.” Courts of Appeals disagree as to whether a Rule 60(b)(4) motion should be treated as a “complaint to revoke” a plan subject to §1330’s time limit and substantive limitation to motions based on fraud. Compare Whelton, 432 F. 3d, at 156, n. 2, with In re Fesq, 153 F. 3d 113, 119, and n. 8 (CA3 1998). We need not settle that question, however, because the parties did not raise it in the courts below. And even under a theory that would treat United’s Rule 60(b)(4) motion as a “complaint to revoke” the plan, United’s failure to file its motion within §1330(a)’s 180-day deadline and its failure to seek relief on the basis of fraud did not deprive those courts—and does not deprive us—of authority to consider the motion on the merits because those limitations are not jurisdictional. See Arbaugh v. Y & H Corp., 546 U. S. 500, 515–516 (2006) ; Reed Elsevier, Inc. v. Muchnick, ante, at 12–13.
10 Sections 1328(a) and 523(a)(8) provide that student loan debt is dischargeable in a Chapter 13 proceeding if a court makes a finding of undue hardship. In contrast, other provisions in Chapter 13 provide that certain other debts are not dischargeable under any circumstances. See, e.g., §§523(a)(1)(B), (C) (specified tax debts); §523(a)(5) (domestic support obligations); §523(a)(9) (debts “caused by” the debtor’s unlawful operation of a vehicle while intoxicated). We express no view on the conditions under which an order confirming the discharge of one of these types of debt could be set aside as void.
11 The Government suggests that §523(a)(8)’s “self-executing” nature derives in part from the text of §523(a), which states that “[a] discharge under section 727 . . . or 1328(b) of this title does not discharge an individual debtor from any debt,” including the student loan debts specified in paragraph (8) (emphasis added); see Brief for United States as Amicus Curiae 18; see also Reply Brief for Petitioner 1–2. That is not what we concluded in Hood and, in this case, would be irrelevant in any event. In Hood, we described as “ ‘self-executing’ ” paragraph (8)’s instruction that student loan debt not be discharged “unless” an undue hardship determination is made. 541 U. S., at 450. The “does not discharge” language in §523(a), which applies generally to every enumerated paragraph in that section—and to which we never referred in Hood—was not relevant to our analysis. That is evident from the authority we cited to support our description of §523(a)(8)’s condition as “ ‘self-executing.’ ” E.g., id., at 450 (citing S. Rep. No. 95–989, p. 79 (1978), which states that “[p]aragraph (8) . . . is intended to be self-executing” insofar as “the lender or institution is not required to file a complaint to determine the nondischargeability of any student loan” (emphasis added)). In any event, the “does not discharge” language in §523(a) is inapplicable to this case. Section 523(a) provides that “[a] discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of [the Code] does not discharge an individual debtor from” the debts described in §523(a)’s enumerated paragraphs. But Espinosa did not seek a discharge under “sections 727, 1141, 1228(a), 1228(b), or 1328(b).” He sought a discharge under §1328(a), which provides that, upon completion of a Chapter 13 plan, a bankruptcy court “shall grant the debtor a discharge of all debts provided for by the plan … , except any debt … of the kind specified in … paragraph … (5), (8), or (9) of section 523(a).” (Emphasis added). Section 1328(a) thus incorporates by reference paragraph (8) of §523(a), including that paragraph’s self-executing requirement for an undue hardship determination, but does not incorporate the “does not discharge” text of §523(a) itself.
12 United relies on our decisions in United States ex rel. Wilson v. Walker, 109 U. S. 258 (1883) , and Vallely v. Northern Fire & Marine Ins. Co., 254 U. S. 348 (1920) , to argue otherwise. Those authorities are not controlling because they predate Rule 60(b)(4)’s enactment and because we interpreted the statutes at issue in those cases as stripping courts of jurisdiction—either over the parties, id., at 354–356, or the res, Wilson, supra, at 265–266—and United concedes that the statutory limit in this case is not jurisdictional. See supra, at 9.
13 This is essential to preserve the distinction between Congress’ treatment of student loan debts in §523(a)(8) and debts listed elsewhere in §523. Section 523(a)(8) renders student loan debt presumptively nondischargeable “unless” a determination of undue hardship is made. In contrast, the debts listed in §523(c), which include certain debts obtained by fraud or “willful and malicious injury by the debtor,” §523(a)(6), are presumptively dischargeable “unless” the creditor requests a hearing to determine the debt’s dischargeability. The Court of Appeals’ approach would subject student loan debt to the same rules as the debts specified in §523(c), notwithstanding the evident differences in the statutory framework for discharging the two types of debt.
14 In other contexts, we have held that courts have the discretion, but not the obligation, to raise on their own initiative certain nonjurisdictional barriers to suit. See Day v. McDonough, 547 U. S. 198, 202, 209 (2006) (statute of limitations); Granberry v. Greer, 481 U. S. 129, 134 (1987) (habeas corpus petitioner’s exhaustion of state remedies). Section 1325(a) does more than codify this principle; it requires bankruptcy courts to address and correct a defect in a debtor’s proposed plan even if no creditor raises the issue.
15 Bankruptcy courts appear to be well aware of this statutory obligation. See, e.g., In re Mammel, 221 B. R. 238, 239 (Bkrtcy. Ct. ND Iowa 1998) (“[W]hether or not an objection is presently lodged in this case, the Court retains the authority to review this plan and deny confirmation if it fails to comply with the confirmation standards of the Code”).

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