Opinion ID: 196479
Heading Depth: 2
Heading Rank: 3

Heading: Are Federal Credit Unions Federal Instrumentalities?

Text: 36 The term government unit, as employed in 11 U.S.C. Sec. 523(a)(8), means: United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States, ... a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government. 11 U.S.C. Sec. 101. Legislative history suggests that Congress intended to defin[e] 'government unit' in the broadest sense. H.Rep. No. 95-595, 95th Cong., 1st Session 311 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5759, 5963, 6268, reprinted in App. 2 Collier on Bankruptcy, pt. II, at 311 (Lawrence P. King, ed., 15th ed. 1995). We think it evident, based on this, that 11 U.S.C. Sec. 101 encompasses federal credit unions as federal instrumentalities, but refrain from making a categorical holding to that effect at this juncture. The legislative history indicates that Congress meant to temper its exhortation to define broadly. According to that history, we must demonstrate that federal credit unions have an active relationship with the federal government, that they carry out some governmental function. Id.  '[I]nstrumentality' does not include entities that owe their existence to State action such as the granting of a charter or a license, but that have no other connection with a State or local government or the Federal Government. Id. 37 Whether federal credit unions are federal instrumentalities, thus, depends on the types of functions such organizations perform. We are aware of no settled process for assessing the governmental character of a particular function or service. In the area of federal instrumentality decisions, we lack the advantage of any bright line rules or tests. Federal Reserve Bank of Boston v. Comm'r of Corporations and Taxation, 499 F.2d 60, 64 (1st Cir.1974); see also United States v. Michigan, 851 F.2d at 806 (citing Dep't of Employment v. United States, 385 U.S. 355, 358-59, 87 S.Ct. 464, 467, 17 L.Ed.2d 414 (1966) ([T]here is no simple test for ascertaining whether an institution is so closely related to government activity as to become a tax-immune instrumentality)). As a result, we rest our decision on a combination of statutory interpretation, case law, and consideration of the factors relevant to federal instrumentality determinations. 38 Perhaps the most significant factor in determining whether a particular entity is a federal instrumentality is whether it performs an important government function. United States v. Michigan, 851 F.2d 803, 806 (6th Cir.188); see also Federal Land Bank v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65 (1941). In response to devastating Depression era losses--failed banks; high interest rates; diminished credit opportunities--Congress created scores of federal organizations and corporations designed to stabilize the national economy and pursue other governmental ends. See generally Lebron, --- U.S. at ---- - ----, 115 S.Ct. at 969-71 (detailing the history of federal corporations in the United States and explaining that even the denial of federal instrumentality status in enabling legislation is not dispositive in federal instrumentality determinations); see also Reconstruction Finance Corporation, 306 U.S. at 391, n. 3, 59 S.Ct. at 518-19, n. 3 (listing federal credit unions among a list of forty corporations Congress provided to discharge governmental functions). As part of this rehabilitative effort, the Congress created federal credit unions by enacting the Federal Credit Union Act, 12 U.S.C. 1751 et seq., in 1934. 39 The express purpose of the Federal Credit Union Act, articulated in its long title, was: [T]o establish a Federal Credit Unions System, to establish a further market for securities of the United States and to make more available to people of small means credit for provident purposes through a national system of cooperative credit, thereby helping to stabilize the credit structure of the United States. 12 U.S.C. Sec. 1751, reprinted in Credit Union National Association, Inc., Legislative History of the Federal Credit Union Act: A Study of the Historical Development From 1934 to 1980 of the Statute Governing Federal Credit Unions;  see also Branch Bank & Trust v. Nat'l Credit Union Admin. Bd., 786 F.2d 621, 625-26 (4th Cir.1986), cert. denied, 479 U.S. 1063, 107 S.Ct. 948, 93 L.Ed.2d 997 (1987). In effect, the Federal Credit Union Act created a localized and liberalized system of federal credit services. It modeled that system on the strong network of state and local credit unions already established at the time. That network started functioning in the early twentieth century, with the occurrence of two important events, the founding of the first United States-based credit union, La Caisse Populaire, in 1908 and the enactment of the first comprehensive credit union statute, the Massachusetts Credit Union Act, Mass.Gen.L. ch. 171, Sec. 1 et seq., in 1909. See La Caisse Populaire, 563 F.2d at 505; J. Moody and G. Fite, The Credit Union Movement: Origins and Development 1850 to 1980 19-31 (2d ed. 1984). 40 This history demonstrates that federal credit unions were intended to perform a variety of governmental functions. Our research establishes that they still do. Federal credit unions enable the federal government to make credit available to millions of working class Americans. These organizations, often described as cooperative association[s] organized ... for the purpose of promoting thrift among [their] members and creating a source of credit for provident or productive purposes, 12 U.S.C. Sec. 1752, provide credit at reasonable rates to millions of individuals who--because they lack security or, as recent studies show, reside in low income areas or in communities primarily inhabited by racial minorities--would otherwise be unable to acquire it. Cf. United States v. Michigan, 851 F.2d at 806; see also Federal Credit Union Handbook, at iii; Anthony D. Taibi, Banking, Finance, and Community Economic Empowerment: Structure, Economic Theory, Procedural Civil Rights, and Substantive Racial Justice, 107 Harv.L.Rev. 1463 (1994) (describing impact of redlining and credit discrimination on local communities). Because large financial entities generally refuse to extend credit to individuals without traditionally accepted forms of collateral, entities offering usurious interest rates are too often the only other viable source of credit for many working class people. See Branch Bank & Trust, 786 F.2d at 621 (outlining formation of credit unions in response to entities offering usurious rates). 41 Nevertheless, the functions performed by federal credit unions are not limited to broadening the availability of credit in the United States. Federal credit unions are authorized to perform many other governmental functions. To begin, the Federal Credit Union Act authorizes them to issue loans and dividends to their members. 12 U.S.C. Sec. 1757; see also 12 U.S.C. Sec. 1763. It also authorizes federal credit unions to invest their funds in obligations of the United States; invest in securities; or make deposits in national banks. Id. Indeed, federal credit unions serve as fiscal agents of the United States and depositories for public monies. United States v. Maine, 524 F.Supp. at 1059; see also United States v. Michigan, 635 F.Supp. 944, 947 (W.D.Mich.1985), aff'd, 851 F.2d 803 (6th Cir.1988); 12 U.S.C. Sec. 1767(a) (Each Federal credit union organized under this chapter ... shall act as fiscal agent of the United States ... [and] [a]ny Federal credit union ... shall be a depository of public money....). 42 Such functions have properly been regarded as important governmental functions by other courts. In Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577 (1921), the United States Supreme Court acknowledged that employment as a fiscal agent of the United States and service as a depository for public monies fulfilled important government purposes. 255 U.S. at 209-11, 41 S.Ct. at 248-49. Smith exempted farm loans from state taxation because of the governmental functions federal land banks performed and, concomitantly, held that Congress acted within its constitutional authority when it enacted the Federal Farm Loan Act, 39 Stat. 360, as amended by Jan. 18, 1918, 40 Stat. 431. The Farm Loan Act established federal land banks and joint-stock land banks. Id. 43 In the two decades following the Smith decision, the Court held that federal land banks operated as government instrumentalities on three separate occasions. See Federal Land Bank of Columbia, S.C. v. Gaines, 290 U.S. 247, 54 S.Ct. 168, 78 L.Ed. 298 (1933); Federal Land Bank of St. Louis v. Briddy, 295 U.S. 229, 55 S.Ct. 705, 79 L.Ed. 1408 (1935); and Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65 (1941). In Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65 (1941), the Court explained the reasons for this conclusion and emphasized that federal land banks performed the important governmental purpose of extending credit, at low interest rates, to farm borrowers. 314 U.S. at 100, 62 S.Ct. at 4. Federal credit unions indisputably provide a similar service and reach, by definition, a much broader cross-section of the nation's citizens. United States v. Michigan, 851 F.2d at 806. 44 More recently, in 1988, the Sixth Circuit embraced the Supreme Court's conclusions about the governmental importance of extending credit, functioning as a fiscal agent of the United States, and extending credit at low interest rates. In United States v. Michigan, 851 F.2d 803 (6th Cir.1988), the Sixth Circuit found that federal credit unions are government instrumentalities precisely because they perform such functions. 851 F.2d at 806-07. The court explained that, [b]ecause of the important governmental functions performed by federal credit unions, ... we hold that federal credit unions are federal instrumentalities. Id. at 807. The court then went on to hold that the Supremacy Clause and 12 U.S.C. Sec. 1768 immunize federal credit unions from state taxation. Id.; see also United States v. Maine, 524 F.Supp. 1056 (D.Me.1981) (holding that state tax on federal credit unions violated the Supremacy Clause and the Federal Credit Unions Act because federal credit unions are federal instrumentalities). 45 We appreciate, as debtor pointed out below, that private institutions deliver many of the services performed by federal credit unions. In the more than sixty years since the Federal Credit Union Act's passage, federal credit unions have, undeniably, increased in number and significantly expanded the services they provide. Today, these institutions offer an increasingly complicated and complex array of financial services. United States v. Michigan, 851 F.2d at 805; see generally Federal Credit Union Handbook, supra at 11-14. 46 We firmly reject, however, debtor's argument that this fact militates against a finding in TIFCU's favor. That federal credit unions now have the capacity to compete on quasi-equal footing with other financial institutions does not alter our conclusion that they perform a predominantly governmental purpose. We echo the district court's insight that the extent to which a federal credit union resembles a bank should [not] be determinative of the issue before the court. TI Federal Credit Union, 183 B.R. at 4. We also note that internal characteristics, such as limitations on membership and location, distinguish federal credit unions from proprietary institutions such as banks. Banks, with few exceptions, may do business wherever and with whomever they wish. Federal credit unions, in contrast, must limit their memberships and, therefore, business operations, to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district. 12 U.S.C. Sec. 1759. 47 Finally, we, like our colleagues on the Sixth Circuit, find two additional features federal credit unions share conclusive--tax exemption and governmental regulation. Congress, in exempting federal credit unions from federal income taxation, has expressed the view that federal credit unions serve several unique governmental purposes and are, therefore, different from banks. Section 501(c)(1)(A) of the Internal Revenue Code provides an exemption for [a]ny corporation organized under Act of Congress which is an instrumentality of the United States ... if such corporation is exempt from Federal income taxes under such Act as amended and supplemented before July 18, 1984.... 26 U.S.C. section 501(c)(1)(A)(i). Because the Federal Credit Union Act expressly provides federal credit unions an exemption from federal, as well as state, territorial, or local taxation, federal credit unions fall within the parameters of this provision. Cf. La Caisse, 563 F.2d at 509; see 12 U.S.C. Sec. 1768; see also Rev.Rul. 55-133, superseded by Rev.Rul. 60-169 (Federal credit unions are recognized as instrumentalities of the United States within the meaning of section 501(c)(1) of the Internal Revenue Code); Rev.Rul. 60-169 (Federal Credit Unions organized and operated in accordance with the Federal Credit Union Act are recognized as instrumentalities of the United States within the meaning of section 501(c)(1) of the Code); Bruce R. Hopkins, The Law of Tax-Exempt Organizations 323-24, n. 1 (1983). 48 This tax exemption strengthens our view that Congress regards federal credit unions in a special light. By this, we do not mean to suggest that a necessary correlation exists between federal instrumentality status and tax exemption. The Internal Revenue Code itself belies the value in drawing such an inference, for it also provides an exemption for state credit unions under Section 501. Yet, such entities clearly are not federal instrumentalities. 49 The manner in which Congress exempted federal credit unions from taxation is, however, significant. Congress did not treat federal and state credit unions alike; it addressed federal and state credit unions in entirely different sections of the Internal Revenue Code. La Caisse, 563 F.2d at 509. State credit unions are exempted under Section 501(c)(14), whereas, federal credit unions are exempted under Section 501(c)(1). Id. Section 501(c)(14), unlike Section 501(c)(1), neither mentions federal instrumentalities nor draws a direct relationship between the federal government and the services provided by state credit unions. These aspects of the tax exemption federal credit unions receive support our belief that Congress regards federal credit unions as federal instrumentalities. 50 The imprimatur Congress places on federal credit unions by way of tax exemption is not the only additional feature which convinces us of federal credit unions' special status. Extensive government regulation further distinguishes federal credit unions from ordinary proprietary organizations. The NCUA administers programs and promulgates regulations for credit union chartering, membership, and governance in accordance with the Administrative Procedure Act, 5 U.S.C.A. Sec. 551 et seq. See 12 U.S.C. Sec. 1752a; see also 12 C.F.R. Secs. 701.1, 708, 709, 710; National Credit Union Administration, Chartering and Field of Membership Manual (1994). It promulgates regulations concerning credit practices, 12 C.F.R. Part 706; dissemination of savings program information, 12 C.F.R. Secs. 707.1-707.6; payment of dividends, 12 C.F.R. Sec. 707.7; and inter alia, insurance and group purchasing plans, 12 C.F.R. Part 721. Finally, not unlike other executive branch agencies, the NCUA issues revised rulings which provide guidance to credit unions operating in the field. See 12 C.F.R. Ch. VII (1-1-95 Edition). 51 The decentralized system in which federal credit unions operate does not minimize the significance of NCUA's regulatory acts, the weight to be accorded the Federal Credit Union Act's careful delineation of federal credit union powers, or the significance of the other statutes governing federal credit union activities. See e.g. Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq.; Equal Credit Opportunity Act, 15 U.S.C. Sec. 1601 et seq.; Fair Credit Reporting Act, 15 U.S.C. Sec. 1681 et seq.; Home Mortgage Disclosure Act, 12 U.S.C. Sec. 2801; and the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1692 et seq. Federal credit unions do not, a fortiori, wield powers akin to those employed by banks because they are member-owned and authorized, through their individual boards of directors, to develop guidelines for their operation or independently make decisions about the services they provide. Cf. United States v. California Bd. of Equalization, 2 Ca.State Tax Rep. (CCH), p 400-071, aff'd, 709 F.2d 1518 (9th Cir.1983). Any suggestion that they do misses, what the Supreme Court, in Federal Land Bank v. Bismark, 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65 (1941) regarded as a fundamental point: [t]he federal government is one of delegated powers, and from that it necessarily follows that any constitutional exercise of its delegated powers is governmental. 314 U.S. at 102, 62 S.Ct. at 5. We refuse to penalize federal credit unions for successfully performing the governmental functions assigned them. And, therefore, we find that increases in the number of federal credit unions and improvements in federal credit union services indicate that the Federal Credit Union Act's goal of providing credit at reasonable rates is being met. See United States v. Michigan, 851 F.2d at 806. 52 We hold, moreover, that performance of governmental functions, exemption from federal tax, and extensive government regulation are compelling indicia of federal instrumentality status. In the past, such factors have persuaded this court to make a finding of government instrumentality status. In Federal Reserve Bank of Boston v. Comm'r of Corporations and Taxation of the Commonwealth of Massachusetts, 499 F.2d 60 (1st Cir.1974), for example, we recognized federal reserve banks as federal instrumentalities on the basis of characteristics shared, in large part, by federal credit unions. Two characteristics of federal credit unions, acting as a depository for public monies and serving as a fiscal agent of the United States, figured prominently in our analysis. 499 F.2d 60, 62. 53 Similarly, in United States v. State Tax Comm'n, 481 F.2d 963 (1st Cir.1973), we concluded that federal savings and loans associations are federal instrumentalities. 481 F.2d at 969; see also Federal Reserve Bank of Boston, 499 F.2d at 62. That case, like Federal Reserve Bank of Boston and many of the other cases involving questions of federal instrumentality status, concerned the validity of state taxes imposed on federal entities. See, e.g., United States v. Michigan, 851 F.2d at 803; Keifer and Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 390 n. 3, 59 S.Ct. 516, 518-19 n. 3, 83 L.Ed. 784 (1939); United States v. Maine, 524 F.Supp. at 1056; United States v. California Bd. of Equalization, 2 Ca.State Tax Rep. (CCH), p 400-071, aff'd, 709 F.2d at 1518. We held that a Massachusetts tax imposed an impermissible burden on federal savings and loans because it provided a deduction for governmental institutions that were very similar to federal loan associations, but not for federal credit loan associations themselves. 481 F.2d at 963. In reaching our decision that such organizations are federal instrumentalities, we noted that federal savings and loans are federally created banks, chartered and regulated by an executive branch entity, the Federal Home Loan Board, and that they serve the statutory purpose of providing 'local mutual thrift institutions in which people may invest their funds and ... for the financing of homes, ... [a] purpose ... said to affect the welfare of the nation as a whole. 481 F.2d at 967-78. Federal credit unions have similar characteristics and purposes. 54 In United States v. State Tax Comm'n, we, admittedly, indulged the argument that credit unions and federal savings and loans can be distinguished. But, few, if any, inferences can be drawn from our recognition of such distinctions because United States v. State Tax Comm'n involved state, not federal, credit unions. State credit unions are altogether different entities; unlike federal credit unions, they are neither chartered under the Federal Credit Union Act, nor regulated by the NCUA. 55 It does not, of course, follow that no differences between federal credit unions and federal savings institutions exist. The United States Supreme Court has itself held that federal credit unions and federal loan associations are far from identical. First Federal Sav. and Loan Ass'n of Boston v. State Tax Comm'n, 437 U.S. 255, 260, 98 S.Ct. 2333, 2336, 57 L.Ed.2d 187 (1978). The basis for its holding, however, rested on the assumption that federal credit unions are more closely tied to the government and its functions than federal loan associations, not less. As the Court noted when it considered some of the same issues we addressed in United States v. State Tax Comm'n: Congress has long treated federally chartered credit unions differently [and more favorably than] ... federally chartered savings and loan associations. 437 U.S. at 260, 98 S.Ct. at 2337. This special treatment is evident in the tax exemptions exclusively afforded federal credit unions and insurance programs designed to protect federal credit union deposits. 56 We think it plain that federal credit unions are, as a general matter, federal instrumentalities. Our statement in Northeast Federal Credit Union v. Neves, 837 F.2d 531 (1st Cir.1988), that federal credit unions are not federal agencies does not detract from this conclusion. The principles addressed in that case are not directly relevant here. Furthermore, we make no effort to liken federal credit unions to government agencies; we are persuaded only that they are government instrumentalities, lesser in scope and in responsibility than actual government agencies. 57 D. Is Treating TIFCU As A Governmental Unit Consistent With the Purposes of the Statute? 58 Our analysis in this case does not end with our conclusion that federal credit unions are government instrumentalities. We must still resolve whether treating federal credit unions as federal instrumentalities and, thus, as government units, is consistent with the purposes of 11 U.S.C. section 523(a)(8). Each instrumentality must be examined in light of its governmental role and the wishes of Congress as expressed in relevant legislation. Federal Reserve Bank of Boston, 499 F.2d at 64. 59 It is undisputed that Section 523(a)(8) was enacted to prevent abuses in student loan programs. In re Pelkowski, 990 F.2d at 742. Its history, which begins in 1976 with its precursor, Section 439A of the Education Amendments of 1976, reflects a congressional intent to minimize the opportunities to use bankruptcy as a way of avoiding repayment of student loan debts. Id. Section 439A, which limited the dischargeability of only guaranteed or insured educational loans, was enacted after the 1973 Commission on the Bankruptcy Laws of the United States described the incidence of debtors attempting to discharge educational loan debts in bankruptcy as reprehensible and a threat to the continuance of educational loan programs. H.R.Doc. No. 93-137, 93d. Cong., 1st Sess., Pts. I and II (1973), reprinted in App. 2 Collier, pt. I, at 176-77; see also Jerome M. Organ, Good Faith and the Discharge of Educational Loans in Chapter 13: Forging A Judicial Consensus, 38 Vand.L.Rev. 1087, 1093-97 (1985). 60 Section 439A was later reconsidered by the House Subcommittee on Civil and Constitutional Rights, but the nondischargeability policy contemplated nevertheless became part of the Bankruptcy Reform Act of 1978 through an amendment made to H.R. 8200. In re Pelkowski, 990 F.2d at 742. Representative Allen Ertel introduced the amendment which eventually became Section 523(a)(8), noting that defaults and delinquencies in federal student loan programs increased by more than three hundred percent between 1972 and 1976. H.R. No. 95-595, 95th Cong. 1st Session (1977), U.S.Code Cong. & Admin.News 1978, p. 5759, 5963, reprinted in App. 2 Collier, pt. II, at 537. Representative Ertel explained: 61 [T]hese bankruptcies could easily destroy the federal student loan programs.... This problem cannot be permitted to spread nationwide, because destruction of the student loan programs would operate to deny the benefits of higher education to many would-be students who are otherwise qualified for post-high school education or training.... The destruction of student loan programs would represent a tremendous waste of one of this nation's greatest assets, the minds and skills of American youth. 62 Id. Representative Ertel's statements are noteworthy, though admittedly not conclusive of Congress' intent, In re Pelkowski, 990 F.2d at 743 (citing Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 118, 100 S.Ct. 2051, 2061, 64 L.Ed.2d 766 (1980)), because they were supported by a number of legislators. Id. at 742-43. Both Senator DeConcini and Representative Edwards mentioned the amendment on the floor of their respective chambers. See id. at 742. On the House floor, Representative Edwards also explained that Section 523(a)(8) represents a compromise between the House bill and the Senate amendment regarding educational loans. 124 Cong.Rec. p. H 11096, reprinted in App. 3 Collier on Bankruptcy, pt. IX, at 101. Representative Edwards went on to clarify that Section 523(a)(8) would only make educational loans issued by governmental units or nonprofits nondischargeable and that it would broaden the bankruptcy laws in effect at the time by extending coverage to non-federally insured loans. Id. 63 In its original form, Section 523(a)(8) only referred to loans acquired from a governmental unit, or a nonprofit institution of higher education for an educational loan. Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 92 Stat. 2549 (1978); see also In re Segal, 57 F.3d 342 (3rd Cir.1995). This version of the subsection, however, was short-lived. Congressional efforts to limit the dischargeability of educational loans by expanding the types of loans or institutions covered by Section 523(a)(8) continued after 1978. Amendments made in 1979 rewrote Section 523(a)(8) to include educational loan[s] made, insured, or guaranteed by a government unit or made under any program funded in whole or in part by a governmental unit or a nonprofit institution of higher education. Act of August 14, 1979, Pub.L. No. 96-56, Sec. 3(1), 93 Stat. 387 (1989) (amending 11 U.S.C. Sec. 523(a)(8) (1979)). 64 In 1984, the Bankruptcy Amendment Act of 1984 struck the phrase of higher education, from Section (a)(8). P.L. 98-353, section 454(a)(2). This extended the provisions of that section to all nonprofit loan programs, not merely those associated with an institution of higher education. When read together, the 1979 and 1984 amendments made nondischargeable loans issued pursuant to an educational loan program operated by a nonprofit organization or a governmental unit and educational loans acquired from a commercial financial institution, if such loans were insured by a governmental unit. See In re Segal, 57 F.3d 342, 346 (3rd Cir.1995). 65 Amendments made in 1990, by the Crime Control Act of 1990, altered Section 523(a)(8) yet another time. They expanded nondischargeability to encompass educational loans, as well as educational benefit overpayments and obligations to repay funds received as an educational benefit, scholarship or stipend. Crime Control Act of 1990, Pub.L. 101-647, Sec. 3621(1), 104 Stat. 4964-4965 (1990) (amending 11 U.S.C. Sec. 523(a)(8) (1984)). The 1990 Amendment also made it more difficult for debtors to take advantage of the exceptions to nondischargeability. It increased from five to seven the number of years which must have elapsed between the date an exception seeking debtor's loans first became due and the filing of the bankruptcy petition. Id. at section 3621(2). 66 Viewed against the backdrop of the Bankruptcy Code as a whole, Section 523(a)(8) and the amendments made to it are aberrations from the norm. Congress drafted the Bankruptcy Code to effectuate the general purpose of providing debtors with 'a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.'  In re Alibatya, 178 B.R. 335, 337 (E.D.N.Y.1995) (quoting Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 78 L.Ed. 1230 (1934)). The Code, thus, was intended to be a mechanism for liberal discharge of debt. Even Chapter 7, the Code section under which debtor currently seeks relief, reflects that purpose by entitling debtors to a discharge of all debts except obligations ... specifically except[ed] from discharge. Jerome M. Organ, Good Faith and the Discharge of Educational Loans in Chapter 13: Forging A Judicial Consensus, 38 Vand.L.Rev. 1087, 1093 (1985); see also 11 U.S.C. Sec. 727(b). Section 523(a)(8), in contrast, departs significantly from the liberal dischargeability policy manifested in the bankruptcy laws. In re Alibatya, 178 B.R. 335, 337 (E.D.N.Y.1995). From its inception, it has operated as a limit on code sections such as Chapter 7, primarily on the theory that the there are some instances in which a creditor's interest in recovering full payment of debts outweighs the debtor's interest in a complete fresh start. See Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 659-60, 112 L.Ed.2d 755 (1991). Thus, whereas the Bankruptcy Code focuses on the impact financial problems have on individual debtors, Section 523(a)(8) concentrates on the impact individual debtor's have on future educational debtors and institutional creditors, particularly unsecured creditors like TIFCU. Cf. In re Alibatya, 178 B.R. at 337. Section 523(a)(8) sends the clear message that the interest in ensuring the continued existence and operation, the educational loan programs of government units and nonprofit organizations supersedes the interest in minimizing the financial difficulties of individual debtors. See id.; In re Merchant, 958 F.2d 738, 740 (6th Cir.1992). Its purpose, essentially, is to preclude certain educational loan debtors from taking unfair advantage of the Code's fresh start policy. In re Lohman, 79 B.R. 576, 580 (Bankr.D.Vt.1987). 67 We are convinced that treating federal credit unions as government instrumentalities and, thus, government units, is consistent with Section 523(a)(8)'s discharge-limiting purpose. By enacting Section 523(a)(8), Congress sought principally to protect government entities and nonprofits--places which lend money or guarantee loans to individuals for educational purposes--from bankruptcy discharge. In re Segal, 57 F.3d at 348. Including federal credit unions within the universe of entities regarded as government units under Section 523(a)(8), in accord with this purpose, reduces opportunities for dischargeability and minimizes opportunities for fraud. 68 Without imputing any fraudulent intent to DelBonis, we point out that narrowly construing the term government unit to exclude federal credit unions would create a perverse incentive for educational debtors. A definition of government unit which excludes federal credit unions would encourage debtors to circumvent nondischargeability provisions by taking all their school loans out with federal credit unions or, as in the present case, having a family member do so. Educational loan programs could be decimated by this and millions of students, individuals probably not unlike the members of debtor's family who benefitted from his dealings with TIFCU, would ultimately be precluded from pursuing opportunities in higher education. See H.R. No. 95-595, 95th Cong. 1st Session (1977), U.S.Code Cong. & Admin.News 1978, pp. 5759, 5963, reprinted in App. 2 Collier, pt. II, at 537 (Remarks of Representative Ertel). 69 This result clearly would be in conflict with the legislative goals manifested in Section 523(a)(8). And we note, though it does not bear directly on our interpretation of Section 523(a)(8), that it would undermine the Federal Credit Union Act as well. One of the Federal Credit Union Act's primary goals is to make more available to people of small means credit for provident purposes. 12 U.S.C. Sec. 1751 et seq. Allowing educational loans issued by federal credit unions to be freely discharged in bankruptcy could devastate many federal credit unions. Because loans comprise the major part of the federal credit union investments, it would drastically decrease opportunities for working class people to obtain credit. Federal credit unions, as mutual thrift institutions, rely on members like DelBonis to repay the debts they accrue, even if those debts are incurred on behalf of a non-member relative. Cf. In re Wilcon, 143 B.R. 4 (D.Mass.1992) (holding Section 523(a)(8) includes debt of parent taken out on behalf of a child). 70 We think it extremely unlikely that Congress ascribed a meaning to government unit which would frustrate not one, but two of its legislative enactments. Therefore, we hold that, federal credit unions are government units within the purpose and meaning of 11 U.S.C. Sec. 523(a)(8). Absent the applicability of one or both of Section 523(a)(8)'s exceptions, the loans debtor obtained from TIFCU are nondischargeable. This case is remanded to the bankruptcy court for a determination of whether either of the exceptions to Section 523(a)(8) nondischargeability are applicable in this case.