Court Opinion

ID: 2963839
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:15:59.337642+00
Date Added: 2024-06-11T11:37:22.127099
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 95-1702

                              T I FEDERAL CREDIT UNION,

                                 Plaintiff, Appellee,

                                          v.

                                 JOHN CARL DELBONIS,

                                Defendant, Appellant.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Reginald C. Lindsay, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                Torruella, Chief Judge,
                                           ___________
                            Bownes, Senior Circuit Judge,
                                    ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Theodore J. Koban for appellant.
            _________________
            Paul  F.  Lorincz, with  whom  Coogan,  Smith,  Bennett,  McGahan,
            _________________              ___________________________________
        Lorincz & Jacobi were on brief for appellee.
        ________________

                                 ____________________

                                  December 18, 1995
                                 ____________________

                      BOWNES,  Senior  Circuit  Judge.   This  appeal  by
                      BOWNES,  Senior  Circuit  Judge.
                               ______________________

            defendant-appellant  John Carl DelBonis,  a chapter 7 debtor,

            concerns the  dischargeability of educational  loans under 11

            U.S.C.   523 (a)(8).  The District Court for the  District of

            Massachusetts  reversed  a  bankruptcy  court  order granting

            DelBonis  summary  judgment.     Debtor's  appeal  from  that

            decision  asks  us to  do  two things:  reverse  the district

            court's  holding  that federal  credit  unions  are nonprofit

            organizations and  hold that educational loans  issued to him

            by creditor-appellee TI Federal Credit Union are,  therefore,

            dischargeable in bankruptcy.  We deny both requests.  

                      Instead,  we affirm  the  result  achieved  by  the

            district court -- that debtor's loans are nondischargeable --

            and  elect not to reach  the issue of  federal credit unions'

            nonprofit status.  Because our conclusion that federal credit

            unions  qualify as government units  within the meaning of 11

            U.S.C.    523(a)(8)  provides  a sufficient  legal basis  for

            upholding the district court's order, we reserve the issue of

            whether such organizations qualify as nonprofit organizations

            within  the   meaning  of  that  statute   for  another  day.

            Jurisdiction of this appeal stems from 28 U.S.C.   158(d).

                    I.     THE FACTS
                    I.     THE FACTS

                      Financial  difficulties caused  defendant-appellant

            John Carl DelBonis ("DelBonis")  to file for bankruptcy under

            Chapter  7  of the  Bankruptcy  Code on  September  20, 1993.

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                                          2

            DelBonis's  Chapter  7 application,  which  he  filed in  the

            Eastern  District  of  Massachusetts,  listed,   inter  alia,
                                                             _____  ____

            educational  loans he  obtained  on behalf  of  his wife  and

            children  as debts to be  discharged.  The  loans, from which

            DelBonis obtained no direct personal  benefit and on which he

            is the sole obligor, were acquired from the  Texas Instrument

            Federal Credit  Union, ("TIFCU") while DelBonis  was employed

            at Texas Instruments, Inc.   DelBonis's employment with Texas

            Instruments,  Inc.,  one  of  nine  institutional members  of

            TIFCU, terminated in November, 1992.

                      Chartered on  May 9, 1960, pursuant  to the Federal

            Credit  Union Act,  12  U.S.C.    1751  et seq.,  TIFCU is  a
                                                    __ ___

            federal credit union and has its principal place of  business

            in  Attleboro,  Massachusetts.    Like  most  federal  credit

            unions,  TIFCU provides  a  variety of  credit, savings,  and

            financial  counseling  services to  its  members.   Loans  --

            educational; home equity; residential real estate; and member

            business  -- however,  represent TIFCU's  primary investment.

            Cf.   National   Credit  Union   Administration,   Office  of
            __

            Examination and  Insurance, Federal Credit Union  Handbook 11
                                        _______ ______ _____  ________

            (1988).   Because TIFCU is  a federal credit  union, its loan

            activities are heavily regulated by the National Credit Union

            Administration ("NCUA").  See generally 12 C.F.R. Ch. VII (1-
                                      ___ _________

            1-95 Edition).   NCUA exists  within the executive  branch of

            the  federal  government  and  was  established  in  1970  to

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                                          3

            "prescrib[e] rules and  regulations for the organization  and

            operation of federal credit unions  . . . ."   Federal Credit
                                                           _______ ______

            Union Handbook, supra, at 2.
            _____ ________  _____

                      DelBonis  took  out his  first  educational expense

            loan  with TIFCU  on  December  27,  1985,  for  the  sum  of

            $3,500.00.  TIFCU  advanced the  loans as part  of a  special

            educational  loan  program.    The  program,  which  was  not

            federally guaranteed, had  several attractive  features.   It

            made  loans  at low  interest  rates,  gave borrowers  longer

            repayment  periods, and  allowed  loans to  be aggregated  in

            maximum amounts greater  than those permitted  under personal

            loan programs.  

                      One  of  the  most appealing  features  of  TIFCU's

            educational  loan program  was that  it enabled  borrowers to

            simultaneously   borrow   additional   funds  and   refinance

            outstanding  balances  on  previous  loans.    DelBonis  took

            advantage of this feature on  numerous occasions.  Under  the

            requirements  of the  loan  program, the  proceeds from  each

            transaction were paid directly to the educational institution

            DelBonis specified. 

                      During  the period  spanning December  27, 1985  to

            January 4,  1991, DelBonis turned to TIFCU  sixteen times for

            assistance in  meeting his family's educational  needs.  Each

            time TIFCU responded by granting him the funds  he requested.

            In  fact,  TIFCU advanced  a  total  of  $43,114.87  in  loan

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                                          4

            proceeds on DelBonis's behalf.  DelBonis ultimately asked and

            was  permitted  to  consolidate  these loans  into  a  single

            promissory note for $39,064.46,  payable over ten years, with

            interest  at  9.6%  per  annum.    A  principal  balance   of

            $32,618.27 is currently due on that amount.

              II.     THE PROCEEDINGS BELOW
              II.     THE PROCEEDINGS BELOW

                      On  December 3,  1993, nine  months after  DelBonis

            filed for Chapter 7 bankruptcy and, thereby,  sought to avoid

            repayment  of his  loan  debt, TIFCU  initiated a  bankruptcy

            court adversary proceeding.  TIFCU requested a  determination

            as  to whether 11 U.S.C.   523(a)(8) rendered the educational

            loans  issued  to  DelBonis nondischargeable  in  bankruptcy.

            TIFCU  argued that  its  status  as  a nonprofit  required  a

            finding of nondischargeability under the statute.

                      Six months  after the adversary  proceedings began,

            the  parties submitted  an Agreed  Statement of  Fact  to the

            bankruptcy  court.    That  document  included  the erroneous

            stipulation that "TIFCU  is not a governmental unit  . . . ."

            Agreed  Statement of Fact at 2.   DelBonis filed a motion for
            _________________________

            summary judgment  on June  6, 1994, almost  immediately after

            the Agreed  Statement of Fact  was filed with  the bankruptcy

            court.  His summary judgment motion raised two issues bearing

            on  11 U.S.C.   523  (a)(8)'s applicability in  this case: 1)

            whether  TIFCU is  a  nonprofit institution;  and 2)  whether

                                         -5-
                                          5

            debtor's  loans  became  due  within  the  seven-year  period

            prescribed by 11 U.S.C.   523(a)(8).  

                      The  bankruptcy court  granted summary  judgment on

            the first issue and, based on its analysis, did not reach the

            second  issue.    The  bankruptcy  court  found  that  "loans

            incurred  to educate members of a  debtor's family qualify as

            educational  loans   within  the  meaning  of   11  U.S.C.   

            523(a)(8)."   In re DelBonis, 169 B.R.  1, 2 (Bankr. D. Mass.
                          ______________

            1994).  It ruled, however, that federal credit unions are not

            nonprofit   organizations   entitled  to   Section  523(a)(8)

            protection because they are comprised  of member-shareholders

            and are authorized to  issue dividends to such members.   Id.
                                                                      ___

            The bankruptcy  court found  that nonprofit  organizations do

            not  possess  such  characteristics.     Id.  at  3-4.    The
                                                     ___

            bankruptcy  court  acknowledged that  TIFCU's  suit  raised a

            novel issue  of law and, therefore,  denied debtor's requests

            for fees and costs.  Id. at 4.  
                                 ___

                      TIFCU appealed  the bankruptcy court's  decision on

            June  28, 1994  and  filed  a  Motion  to  Amend  the  Agreed

            Statement  of  Fact   on  the  ground  that  it   included  a

            stipulation  erroneously denying  TIFCU's legal  status as  a

            government unit.  The  bankruptcy court denied TIFCU's Motion

            to Amend  on July 11,  1994.  TIFCU subsequently  filed a new

            Notice  of Appeal  challenging  both the  bankruptcy  court's

                                         -6-
                                          6

            summary  judgment order and denial of the Motion to Amend the

            Agreed Statement of Fact.

                      On   appeal,  the   district  court   reversed  the

            bankruptcy court's  grant of summary judgment.   It held that

            federal  credit  unions  qualify  as  nonprofit organizations

            under  Section  523(a)(8)  and   issued  a  detailed  opinion

            outlining the legal and  policy-based justifications for such

            a  classification.   Id. at  5.   Our decision  in  La Caisse
                                 ___                            _________

            Populaire Ste. Marie v. United States, 563 F.2d 505 (1st Cir.
            _____________________________________

            1977),  defining   a  credit  union   as  "a   democratically

            controlled, cooperative, nonprofit society organized  for the

            purpose  of encouraging  thrift and  self-reliance  among its

            members .  . .  ,"  was cited  as  support for  the  district

            court's reversal.   Id. at  4-5 (quoting La  Caisse Populaire
                                ___          _______ ____________________

            Ste.  Marie v.  United States,  563 F.2d  505, 509  (1st Cir.
            _____________________________

            1977).   La Caisse held that state credit unions are entitled
                     _________

            to general  income tax exemption  under Section 501(c)(14)(A)

            of the Internal Revenue Code.  Because the ground on which it

            based  its decision  independently warranted  a  finding that

            debtor's  loans  are  nondischargeable,  the  district  court

            deemed  it unnecessary  to "reach  the question  whether [the

            bankruptcy court judge]  should have allowed the  appellant's

            motion to amend its agreed statement of facts regarding . . .

            [TIFCU's] status as a federal instrumentality."  Id. at 5.
                                                             ___

            III.      THE STATUTE
            III.      THE STATUTE

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                                          7

                      Resolution   of   this  case,   as   the  following

            discussion  reveals,  requires us  to  consider  a gaggle  of

            statutes and statutory issues.  Questions about the status of

            federal credit unions implicate the Federal Credit Union Act,

            12 U.S.C.    1751 et  seq., bankruptcy law,  and the  federal
                              __  ___

            income  tax  code.    See  26  U.S.C.    501.    Because  the
                                  ___

            possibilities for  confusion run high, we  think it important

            to clearly set out  the terms of 11  U.S.C.   523(a)(8),  the

            statute on the basis  of which TIFCU initiated the  adversary

            proceeding.    In  relevant  part,  11 U.S.C.     523  (a)(8)

            provides:

                      (a) A discharge  under section 727, 1141,
                      1228(a), 1228(b) or 1328(b) of this title
                      does not discharge  an individual  debtor
                      from any debt -- 

                      (8)    for    an   educational    benefit
                      overpayment  or  loan  made,  insured  or
                      guaranteed by a government unit,  or made
                      under  any program funded  in whole or in
                      part by a  governmental unit or nonprofit
                      institution,  or  for  an  obligation  to
                      repay  funds  received as  an educational
                      benefit,scholarship or stipend, unless --
                      (A) such loan,  benefit, scholarship,  or
                      stipend overpayment first became due more
                      than 7 years (exclusive of any applicable
                      suspension   of  the   repayment  period)
                      before  the date  of  the filing  of  the
                      petition; or (B) excepting such debt from
                      discharge   under  this   paragraph  will
                      impose an un-due  hardship on the  debtor
                      and the debtor's dependents.

                      In   summary,   Section   523(a)(8)    offers   two

            alternatives for  adjudicating educational loans issued  by a

            federal credit union  nondischargeable.   First, it  provides

                                         -8-
                                          8

            that   educational  loans   or   benefit   overpayments   are

            nondischargeable,  if issued in whole or in part by an agency

            qualifying as a nonprofit  organization.  Second, the statute

            also  makes   loans  issued,   insured,   or  guaranteed   by

            governmental units nondischargeable.  A debtor's loans, thus,

            are nondischargeable  if they  fall within the  parameters of

            either provision.  

                      Congress delineates  only  two exceptions  to  this

            nondischargeability  policy.     A  demonstration   that  the

            educational loan,  benefit, scholarship, or  stipend at issue

            in the case first became due more than seven years before the

            filing of the  bankruptcy petition excepts a  debtor from the

            statute.    Finally, evidence  that  nondischargeability will

            impose  an undue  hardship on  debtor or  debtor's dependents

            provides a basis for circumventing  nondischargeability.  The

            hardship alleged, however, must  be undue and attributable to

            truly  exceptional  circumstances,  such  as  illness  or the

            existence  of an unusually large number of dependents.  In re
                                                                    _____

            Lohman, 79 B.R. 576, 581 (Bankr. D. Vt. 1987).  
            ______

                      Thus far, this case has primarily traveled down the

            analytical path  carved out by Section  523(a)(8)'s nonprofit

            organization   provision.     In  the   adversary  proceeding

            conducted  before  the  bankruptcy  court,  TIFCU's principal

            argument for nondischargeability of DelBonis's loans was that

            it qualified  as a nonprofit organization  within the meaning

                                         -9-
                                          9

            of  11 U.S.C.   523  (a)(8).  Similarly,  both the bankruptcy

            court and the district  court, albeit with different results,

            focused  solely   on  whether  federal   credit  unions   are

            nonprofits.

                      A reasonable  basis for assuming such an analytical

            tack  exists, to be sure.   Numerous other  courts have fixed

            their nondischargeability analyses on questions pertaining to

            the, oftentimes, fine distinctions between nonprofit and for-

            profit entities.  Unfortunately, a reading of their decisions

            suggests that no clear consensus on  these questions has been

            reached.    See In re Roberts, 149 B.R.  547 (Bankr. C.D.Ill.
                        ___ _____________

            1993)  ("[I]t  is not  disputed that  the  Credit Union  is a

            nonprofit institution.");  TI Federal Credit Union,  183 B.R.
                                       _______________________

            at 1; Compare with In re Sinclair-Ganos, 133 B.R. 382 (Bankr.
                  _______ ____ ____________________

            W.D.  Mich. 1991) ("[T]his court holds that a credit union is

            not  a  nonprofit institution  under  11  U.S.C. section  523

            (a)(8)); and  In  re Simmons,  175 B.R.  624 (Bankr.  E.D.Va.
                     ___  ______________

            1994) ("[T]he  credit  union in  the  case at  bar  is not  a

            nonprofit  institution   within  the  scope  of  section  523

            (a)(8)").     Disagreements   over  whether   courts   should

            concentrate   on   an  organization's   articulated  purpose,

            specific  financial activities, or competitiveness with other

            for-profit   institutions   in   making    nonprofit   status

            determinations abound.  Compare  TI Federal Credit Union, 183
                                    _______  _______________________

            B.R. at 1  with In re DelBonis, 169 B.R. 1 and In re Roberts,
                       ____ ______________             ___ _____________

                                         -10-
                                          10

            149  B.R.  at   547.    Consequently,   no  clear  test   for

            "determining  when a nonprofit institution is -- or is not --

            a  nonprofit  institution under  section  523  (a)(8) of  the

            Bankruptcy  Code" has  been formulated.   In re  Roberts, 149
                                                      ______________

            B.R. at  551; see also 18  Am. Jur. 2d, Corporations    32 at
                          ___ ____

            827  ("The words  'profit'  or 'nonprofit'  have no  definite

            meaning or general application . . . .").

                      In light of this discord, we are satisfied that the

            district court's  focus on whether federal  credit unions are

            nonprofits  was misplaced.    Sound judicial  policy counsels

            against  deciding  complicated legal  issues  where a  clear,

            principled, alternative  basis for  reaching the same  result

            exists.   Cf.  Walmac Co. v.  Issacs, 220 F.2d  108, 113 (1st
                      __   _____________________

            Cir. 1955).  TIFCU's appeal  of the bankruptcy court's denial

            of its Motion to Amend the Agreed Statement of Fact  gave the

            district court an  opportunity to decide  this case under  11

            U.S.C.     523  (a)(8)'s  government unit  provision.    That

            provision  provides us  with a principled,  alternative basis

            for affirming the district court's nondischargeability order.

                      Unlike the nonprofit provision, the government unit

            prong  of  the  Section  523(a)(8)  is  unambiguous  and  not

            particularly difficult  to interpret.   In re  Pelkowski, 990
                                                    ________________

            F.2d  737, 741-42 (3rd Cir.  1993).  And  the law establishes

                                         -11-
                                          11

            that  federal  credit unions  perform  important governmental

            purposes and operate as federal instrumentalities.   

             IV.      DISCUSSION
             IV.      DISCUSSION

                      Before addressing the substantive issues underlying

            our  conclusion  that  federal credit  unions  are government

            units  within  the  meaning  of Section  523(a)(8),  we  must

            confront  the  threshold issue  of  whether  the question  of

            TIFCU's  status as a  government unit is  properly before us.

            We,  therefore,  begin  our  discussion  by   evaluating  the

            procedural propriety of our deciding this case on that basis.

            The  substantive issues underlying our judgment that debtor's

            loans are nondischargeable will be discussed thereafter.

                      A.   Stipulations
                      A.   Stipulations

                      In  our  judicial  system,  "[s]tipulations  fairly

            entered into  are favored."   Burstein v. United  States, 232
                                          __________________________

            F.2d  19, 23 (8th Cir.  1956).  Factual  stipulations tend to

            "expedite a trial and eliminate the necessity of much tedious

            proof."  Id.  As a result, "parties to a lawsuit  are free to
                     __

            stipulate to  factual matters."   Saviano v.  Commissioner of
                                              ___________________________

            Internal  Revenue, 765 F.2d 643,  645 (7th Cir.  1985).  They
            _________________

            are, however, not generally free to extricate themselves from

            those stipulations  once crafted.    Due to  the interest  in

            preserving  the  efficiency  attained  through  stipulations,

            "[t]he general rule . . . [is] that stipulations of attorneys

            made during  a trial may not  be disregarded or set  aside at

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                                          12

            will . . . ."  Marshall  v. Emersons Ltd., 593 F.2d 565,  569
                           __________________________

            (4th Cir. 1979) (citing Maryland Cas. Co. v. Rickenbaker, 146
                                    ________________________________

            F.2d 751,  753 (4th  Cir. 1944));  see also  73 Am.  Jur. 2d,
                                               ___ ____

            Stipulation   1 (1974).  

                      Litigation  stipulations can  be understood  as the

            analogue  of  terms binding  parties to  a  contract.   As in

            contract  law  though,  rules  limiting  litigants  to  trial

            stipulations  are not absolute.   Marshall, 593  F.2d at 569.
                                              ________

            Case law is clear  that "a stipulation of counsel  originally

            designed to expedite the trial should  not be rigidly adhered

            to  when it becomes apparent  that it may  inflict a manifest

            injustice  upon one of the contracting parties."  Id. at 568.
                                                              __

            Parties will usually be  relieved of their stipulations where

            it becomes evident that "the agreement was made under a clear

            mistake."  Brast v.  Winding Gulf Colliery Co., 94  F.2d 179,
                       ___________________________________

            180 (4th Cir. 1938).

                      Relief  from  erroneous stipulations  is especially

            favored where  the mistake made concerns  a legal conclusion.

            Saviano,  765 F.2d at 645.   "[P]arties may  not stipulate to
            _______

            the legal conclusions to be reached by the  court."  Id.; see
                                                                 ___  ___

            also Swift  & Co. v.  Hocking Valley Ry.  Co., 243 U.S.  281,
            ____ ________________________________________

            289-90  (1917); O'Connor  v. City and  County of  Denver, 894
                            ________________________________________

            F.2d 1210,  1225-26 (10th  Cir. 1990)(citing Platt  v. United
                                                         ________________

            States, 163 F.2d  165, 168  (10th Cir. 1947));  C.C. Gunn  v.
            ______                                          _____________

            United  States,  283 F.2d  358, 364  (8th  Cir. 1960);  In re
            ______________                                          _____

                                         -13-
                                          13

            Dawson,  162 B.R. 329, 334 (Bankr.  D. Kan. 1993).  Issues of
            ______

            law are  the province of courts, not of parties to a lawsuit,

            individuals whose  legal conclusions may be  tainted by self-

            interest.   Courts, accordingly, "are not bound  to accept as

            controlling, stipulations as to questions of law."  Estate of
                                                                _________

            Sanford  v.  Commissioner, 308  U.S.  39,  51 (1939);  accord
            _________________________                              ______

            Dedham  Water Co., Inc. v.  Cumberland Farms Dairy, Inc., 972
            ________________________________________________________

            F.2d  453, 457 (1st  Cir. 1992) (citing  RCI Northeast Servs.
                                                     ____________________

            Div. v. Boston Edison Co., 822 F.2d 199, 203 (1st Cir. 1987);
            _________________________

            In  re Scheinberg,  132 B.R.  443, 444,  aff'd, 134  B.R. 426
            _________________                        _____

            (Bankr. D. Kan. 1992).

                      We  review  this  appeal  de novo  because  we  are
                                                __ ____

            persuaded  that  TIFCU's erroneous  stipulation  that federal

            credit unions are not government  units concerned a matter of

            law,  not of  fact.   See  Compagnie  De Reassurance  v.  New
                                  ___  __________________________________

            England  Reinsur.,  57 F.3d  56,  71 (1st  Cir.  1995), cert.
            _________________                                       _____

            denied,  --  S.Ct.  --,  64  U.S.L.W.  3250 (Dec.  4,  1995).
            ______

            Appellate courts  review bankruptcy  court  findings of  fact

            under  the clearly  erroneous  standard,  but  subject  legal

            conclusion  drawn  by such  courts to  de  novo review.   See
                                                   __  ____           ___

            Western  Auto Supply Co. v.  Savage Arms, Inc.  (In re Savage
            ______________________________________________   ____________

            Indus., Inc.), 43 F.3d  714, 719-20, n.8 (1st Cir.  1994); In
            ____________                                               __

            re Comer, 723 F.2d 737, 739 (9th Cir. 1984);  see also Inwood
            ________                                      ___ ____ ______

            Lab., Inc.  v. Ives  Lab.,  Inc., 456  U.S.  844, 855  n.  15
            _______________________________

            (1982)(citing United States v. Singer Mfg. Co., 374 U.S. 174,
                          ___________________________

                                         -14-
                                          14

            194 n. 9 (1963));  accord Cumpiano v. Banco  Santander Puerto
                               ______ ___________________________________

            Rico, 902 F.2d 148, 153 (1st Cir. 1990).  Whether    Congress
            ____

            meant to include federal credit  unions within the meaning of

            the term "government unit"  has not previously been addressed

            by  this court,  but  is, otherwise,  a garden-variety  legal

            question, one courts are regularly called upon to answer.  It

            primarily  requires us  to consider  not facts,  but  law and

            various  legal  authorities --  i.e., federal  statutes; case

            law;  and legislative  history.   To the  extent, if  at all,

            factual considerations enter our analytical picture, it  will

            be only to  help us reach the proper legal  conclusion on the

            question now  before us.  TIFCU's  erroneous stipulation does

            not bind this appeal.  

                      No  injustice flows  from our  decision to  relieve

            TIFCU  from the  burden  of its  erroneous stipulation.   See
                                                                      ___

            Marshall, 593 F.2d at 568.  Debtor's position, admittedly, is
            ________

            not aided by our decision  to set TIFCU's stipulation  aside.

            We  think it fairly obvious  though, that a  far greater harm

            would be  effectuated by allowing that  stipulation to stand.

            Important federal  bankruptcy and loan policies  are at stake

            in this litigation, not  merely DelBonis's personal financial

            difficulties, however unfortunate and burdensome they may be.

            It  was error  for the  bankruptcy court  to refuse  to allow

            TIFCU to amend the Agreed Statement of Facts.  

             B.       Appeals and Lower Court Error
             B.       Appeals and Lower Court Error

                                         -15-
                                          15

                      Having concluded that the issue  of whether federal

            credit unions qualify  as government units under 11  U.S.C.  

            523 (a)(8)  remains an open issue,  we move on to  consider a

            second,  but not  unrelated, procedural  question:   Does the

            district court's decision not to evaluate TIFCU's appeal from

            the  bankruptcy court's  denial  of its  Motion to  Amend the

            Agreed  Statement of  Fact preclude  us from  addressing that

            issue?   The answer to this question is an unqualified no.  A

            district court's failure to decide an issue raised by a party

            and adequately supported by the facts contained in the record

            does not move that issue beyond an appellate court's purview.

            Estate of Soler v. Rodriguez, 63 F.3d 45, 53  (1st Cir. 1995)
            ____________________________

            (citing Willhauck  v. Halpin,  953  F.2d 689,  704 (1st  Cir.
                    ____________________

            1991).

                      In  this  circuit,  "[a]n  appellate court  is  not

            limited  to the  legal grounds  relied upon  by  the district

            court,  but  may  affirm  on  any  independently   sufficient

            grounds."   Id.; see  also Polyplastics, Inc.  v. Transconex,
                        __   ___  ____ __________________________________

            Inc.,  827  F.2d  859, 861  (1st  Cir.  1987); Casagrande  v.
            ____                                           ______________

            Agonitsas,  748 F.2d 47, 48 n. 1 (1st Cir. 1984)(per curiam).
            _________

            While   it  is   axiomatic   that,   except  in   exceptional

            circumstances, parties may not surprise appellate courts with

            new issues, we do  not find ourselves faced with  a situation

            in  which  a party  has conjured  up  an issue  for appellate

            review without first presenting  it to the trial court.   See
                                                                      ___

                                         -16-
                                          16

            Johnston  v. Holiday Inns, 595 F.2d 890, 894 (1st Cir. 1979);
            _________________________

            see also Teamsters, Chauffers, Warehousemen & Helper's Union,
            ___ ____ ____________________________________________________

            Local No. 59  v. Superline Transp. Co., 953 F.2d  17, 21 (1st
            _____________________________________

            Cir. 1992); McCoy  v. Massachusetts Institute  of Technology,
                        ________________________________________________

            950  F.2d  13 (1st  Cir. 1991),  cert.  denied, 504  U.S. 910
                                             _____________

            (1992) ("It is hornbook law that theories not raised squarely

            in the district court  cannot be surfaced for the  first time

            on appeal.").   TIFCU  raised the  issue of  its status as  a

            government  instrumentality on two  separate occasions.   Its

            effort  to  amend  the  Agreed  Statement of  Facts  and  to,

            thereby,  correct the erroneous legal conclusion that federal

            credit  unions are  not  government units,  coupled with  its

            appeal  of  the bankruptcy  court's  denial  of that  motion,

            preserved the issue for our review.

                      TIFCU  has  fulfilled  its obligation  to  squarely

            raise those issues  most pertinent to  the resolution of  its

            entire case.   See id.   We think  it worth noting,  however,
                           ___ ___

            that we would  be able to reach the  issue of whether federal

            credit unions are governmental  units even if TIFCU  had done

            nothing.   Contrary to what debtor might have us believe, the

            rule that binds parties to their arguments is not inflexible.

            Johnston,  595 F.2d  at  894.   "[A]ppellate court[s]  ha[ve]
            ________

            discretion, in  . .  . exceptional  case[s], to  reach virgin

            issues."   United States v.  La Guardia, 902  F.2d 1010, 1013
                       ____________________________

            (1st Cir.  1990); United States v.  Mercedes-Amparo, 980 F.2d
                              _________________________________

                                         -17-
                                          17

            17, 18-19 (1st Cir.  1992); ; accord Singleton v.  Wulff, 428
                                          ______ ___________________

            U.S. 106,  121 (1976); G.D. v.  Westmoreland School District,
                                   _______  _____________________________

            930  F.2d  942,   950  (1st  Cir.  1991)   (holding  that  in

            exceptional  circumstances appellate courts may review issues

            of  law inadequately  raised  at trial);    United States  v.
                                                        _________________

            Krynicki, 689 F.2d 289, 291-92 (1st Cir. 1989).  
            ________

                      Our  recent  decision,  National  Ass'n  of  Social
                                              ___________________________

            Workers  v. Harwood,  No. 95-1090,  slip op.  at 9  (1st Cir.
            ___________________

            November  13, 1995),  stands for  the proposition  that cases

            involving important constitutional or governmental issues may

            be exceptional and, as such, there should be a full treatment

            of all legal issues  involved, whether squarely introduced by

            the  parties  or  not.     See  Baybank-Middlesex  v.  Raylar
                                       ___  _____________________________

            Distributors,  Inc., No.  95-1623, slip  op. at  5 (1st  Cir.
            ___________________

            November 7, 1995); cf.  Lebron v. Nat'l R.R. Passenger Corp.,
                               ___  ____________________________________

            115 S. Ct.  961, 965 (1995) (permitting  a party to  raise an

            issue  it expressly disavowed  and did not  raise until after

            certiorari  was  granted)("parties  .  . .  [will]  not  [be]

            limited to the precise arguments they made below").  National
                                                                 ________

            Ass'n of  Social Workers  addressed the  constitutionality of
            ________________________

            Rhode  Island  House  of  Representatives  Rule  45,  banning

            "lobbyist  and lobbying from the floor of the House while the

            House is in session . . . ."   Id. at 2.  The district  court
                                           ___

            held  that Rule  45 violated  the free  speech clause  of the

            First  Amendment.   We reversed  the district  court, holding

                                         -18-
                                          18

            that legislative immunity thwarted the constitutional attack,

            even  though that  issue had  not  previously been  raised by

            either  of the parties.   We departed from  the rule limiting

            parties to their lower  court arguments because we recognized

            the  issue presented  by  the case  as  important, "of  great

            public moment."  Id. at 11.   It implicated matters "as basic
                             ___

            as "federalism,  comity, and respect for  the independence of

            democratic institutions."  Id.  National   Ass'n  of   Social
                                       ___  _____________________________

            Workers makes  us doubly certain of  the procedural propriety
            _______

            of deciding this case.   The present case fits  squarely into

            the mold cast  by National  Ass'n of Social  Workers and  the
                              __________________________________

            cases we have deemed  "exceptional" in the past.   See United
                                                               ___ ______

            States  v. La Guardia, 902  F.2d 1010, 1013  (1st Cir. 1990);
            _____________________

            United States  v. Krynicki,  689 F.2d  289, 291-92  (1st Cir.
            __________________________

            1982).   We are convinced that a miscarriage of justice would

            be  worked by a failure to address the governmental status of

            federal credit  unions because the  governmental issues  that

            question  implicates  are   so  important.     The  continued

            viability of  educational loan programs and  the stability of

            federal  credit  unions impact  the  health  of the  national

            economy  and  the  country's   educational  system.    As  we

            indicated  in  the previous  section, whether  federal credit

            unions qualify as government units under Section 523(a)(8) is

            "strictly a question of law" and can be resolved on the basis

            of the  existing record.  La  Guardia, 902 F.2d at  1013.  It
                                      ___________

                                         -19-
                                          19

            requires no additional  factfinding or further argument;  the

            parties are  not prejudiced in any way by the lack of another

            opportunity to reargue their case.  

                      We   think  it  likely  that  questions  about  the

            government  unit  status  of   federal  credit  unions   will

            resurface in  future cases,  in virtually  "identical terms."

            Id.   The dischargeability  of loans under  Section 523(a)(8)
            ___

            continues  to be a heavily  litigated area.   Finally, we are

            convinced that  the result achieved by the district court was

            correct.   And "[i]n the review of judicial proceedings . . .

            [it]  is settled that, if  the decision below  is correct, it

            must  be affirmed,  although the  lower court  relied upon  a

            wrong  ground or gave a  wrong reason."   Helvering v. Gowan,
                                                      __________________

            302 U.S. 238, 245 (1937).     We  can identify  no legitimate

            reason to decline to  chart the alternative course we  see in

            this case.   Additionally, we are  certain that remanding  at

            this point in the case would be  a colossal waste of judicial

            resources.  See Securities and Exchange Commission v. Chenery
                        ___ _____________________________________________

            Corporation, 318 U.S. 80, 88 (1943).  Nothing would be gained
            ___________

            by  asking the district court to reinstate its holding and to

            tackle a legal  question which falls well  within our current

            power  to  formulate.    Id.    Accordingly,  we  proceed.   
                                     ___

            C.        Are      Federal     Credit      Unions     Federal
            C.        Are      Federal     Credit      Unions     Federal

            Instrumentalities? 
            Instrumentalities?

                                         -20-
                                          20

                      The  term  "government  unit,"  as employed  in  11

            U.S.C. 

               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.   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 (1977),  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.  

            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. 
                                 ___

                                         -21-
                                          21

                      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   (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. 

                      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 (1941).  In response  to devastating Depression era losses

            --  failed  banks;  high  interest  rates;  diminished credit

            opportunities   --   Congress  created   scores   of  federal

                                         -22-
                                          22

            organizations  and corporations  designed  to  stabilize  the

            national  economy and  pursue other  governmental ends.   See
                                                                      ___

            generally Lebron, 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  (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.  
                        __ ___

                      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.   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
            _____________________   ___ ____ ____________________________

                                         -23-
                                          23

            Credit  Union  Admin. Bd.,  786  F.2d 621,  625-26  (4th Cir.
            ________________________

            1986),  cert. denied, 479 U.S.  1063 (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,  

            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).
            ____________________________________

                      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.    1752,

            provide credit at reasonable rates to millions of individuals

            who -- because they lack security or, as recent studies show,

                                         -24-
                                          24

            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).

                      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.   1757; see
                                                                      ___

            also 12 U.S.C.    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

                                         -25-
                                          25

            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.   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 . . . .").

                      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 (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.   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.
                                                    ___

                      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
                                                              ___ _______

                                         -26-
                                          26

            Land  Bank of Columbia S.C.  v. Gaines, 290  U.S. 247 (1933);
            ______________________________________

            Federal  Land Bank  of  St. Louis  v.  Briddy, 295  U.S.  229
            _____________________________________________

            (1935);  and Federal Land Bank of St. Paul v. Bismarck Lumber
                         ________________________________________________

            Co., 314 U.S. 95 (1941).  In Federal Land Bank of St. Paul v.
            ___                          ________________________________

            Bismarck Lumber Co., 314 U.S.  95 (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.  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.   
            ________

                      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.   1768  immunize federal credit  unions

                                         -27-
                                          27

            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).     

                      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. 
            _____

                      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

                                         -28-
                                          28

            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.   1759. 

                      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
                                                       __  _________

                                         -29-
                                          29

            F.2d at 509; see 12 U.S.C.   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).  

                      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.  

                      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

                                         -30-
                                          30

            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. 

                      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.    551 et seq.   See 12  U.S.C.   1752a;  see
                                   __ ___    ___                      ___

            also 12 C.F.R.    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.      707.0-06;  payment  of

            dividends, 12  C.F.R.   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

                                         -31-
                                          31

            operating  in the  field.   See  12  C.F.R. Ch.  VII  (1-1-95
                                        ___

            Edition).

                      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.   1601 et seq.; Equal Credit Opportunity Act,
                                   __ ____

            15  U.S.C.    1601  et seq.;  Fair  Credit Reporting  Act, 15
                                __ ____

            U.S.C.    1681  et seq.;  Home  Mortgage Disclosure  Act,  12
                            __ ____

            U.S.C.   2801; and the Fair Debt Collection Practices Act, 15

            U.S.C.    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),    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, 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.   We

                                         -32-
                                          32

            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.
            _________________________

                      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.   

                      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
                             ___ ____ ______________________________

                                         -33-
                                          33

            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 (1939);
            ____________________________

            United States v. Maine, 524 F.Supp. at 1056; United States v.
            ______________________                       ________________

            California Bd. of Equalization, 2 Ca. State Tax Rep. (CCH),  
            ______________________________

            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.

                                         -34-
                                          34

                      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.  

                      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  (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.  This special  treatment is

            evident  in the  tax exemptions exclusively  afforded federal

                                         -35-
                                          35

            credit  unions  and insurance  programs  designed  to protect

            federal credit union deposits.  

                      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.   

            D.        Is Treating TIFCU As A Governmental Unit Consistent
            D.        Is Treating TIFCU As A Governmental Unit Consistent
                      With the  Purposes of the Statute?
                      With the  Purposes of the Statute?

                      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.
            ______________________

                      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

                                         -36-
                                          36

            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).     

                      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

                                         -37-
                                          37

            1976.  H.R. No. 95-595, reprinted in App. 2  Collier, pt. II,
                                    _________ __         _______

            at 537.  Representative Ertel explained:

                      [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. 

            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  (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

                                         -38-
                                          38

            would  broaden the bankruptcy laws  in effect at  the time by

            extending coverage to non- federally insured loans.  Id.  
                                                                 ___

                      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,     3(1),  93   Stat.  387

            (1989)(amending 11 U.S.C.   523(a)(8) (1979). 

                      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

                                         -39-
                                          39

            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).

                      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,   3621(1), 104  Stat. 4865 (1990)(amending 11 U.S.C.

               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).
                                                ___

                      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 Alibayata, 178
                                                     _______________

                                         -40-
                                          40

            B.R.  335,  337 (E.D.N.Y.  1995) (quoting  Local Loan  Co. v.
                                              _______  ______________

            Hunt, 292  U.S. 234 (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.    727(b).   Section  523(a)(8), in  contrast,
            ____

            departs  significantly  from  the   liberal  dischargeability

            policy manifested in  the bankruptcy laws.   In re Alibayata,
                                                         _______________

            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 (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

                                         -41-
                                          41

            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 (D. Vt.
                                   ____________

            1987). 

                      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.  

                      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

                                         -42-
                                          42

            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, reprinted in App. 2 Collier, pt. II,  at 537 (Remarks of
                 _________ __       ________

            Representative Ertel).    

                      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.   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

                                         -43-
                                          43

            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).       

                      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.    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.

                                         -44-
                                          44