Great Lakes Higher Education Corp. v. Pardee (In Re Pardee)

218 B.R. 916, 98 Daily Journal DAR 4135, 98 Cal. Daily Op. Serv. 2793, 1998 Bankr. LEXIS 446, 1998 WL 175746
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedMarch 31, 1998
DocketBAP No. AZ-97-1038-RYKJ, Bankruptcy No. 92-02586-TUC-LO, Adversary No. 96-00186
StatusPublished
Cited by72 cases

This text of 218 B.R. 916 (Great Lakes Higher Education Corp. v. Pardee (In Re Pardee)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Great Lakes Higher Education Corp. v. Pardee (In Re Pardee), 218 B.R. 916, 98 Daily Journal DAR 4135, 98 Cal. Daily Op. Serv. 2793, 1998 Bankr. LEXIS 446, 1998 WL 175746 (bap9 1998).

Opinions

OPINION

JOHN E. RYAN, Bankruptcy Judge.

Robert and Darlene Pardee (“Appellees”) filed a chapter 13 plan (the “Plan”) that purported to discharge postpetition interest on a nondischargeable student loan debt (the “Discharge Provision”) owed to Great Lakes Higher Education Corp. (“Appellant”). Appellant failed to object to the Plan, and the Plan was subsequently confirmed. After Ap-pellees received their chapter 13 discharge, Appellant attempted to collect interest that had accrued on the unpaid principal after the bankruptcy petition .was filed. Appellees filed a motion (the “Motion”) to enforce the discharge and to enjoin permanently Appellant from attempting to collect postpetition interest on the student loan debt. The bankruptcy court granted the Motion and enjoined Appellant from further collection activity. We AFFIRM.

I. FACTS

The facts are undisputed. On August 14, 1992, Appellees filed their chapter 13 bankruptcy petition. On September 9, 1992, Appellant filed its proof of claim (the “Claim”) in the amount of $26,015.22. The Claim did not seek either prepetition or postpetition interest.

The Plan proposed to pay the chapter 13 trustee (the “Trustee”) $515 per month for 60 months for a total of $30,900. The Plan also purported to pay Appellant’s student loan debt as follows:

e. Education Loan(s): The Debtors have two separate obligations for their student loans which are as follows:
(2) Great Lakes Higher Education, 2401 International Way, Madiseon [sic] WI 53704 in the amount of $26,235.00. This obligation was incurred by Robert McKnight Pardee and [is] in default. Great Lakes [Higher] Education shall receive the total amount of $26,235.00 for its claim and any remaining unpaid amounts, if any, including any claims for interest, shall he discharged by the plan.

(second emphasis added).

On June 8, 1993, the Plan was confirmed (the “Confirmation Order”). The Confirmation Order was entered on August 5, 1993. [919]*919Appellant failed to object to its treatment under the Plan.2

On April 9, 1996, Appellees received their chapter 13 discharge after paying all obligations pursuant to the Plan. After Appellant received full payment of its principal and prepetition interest under the Plan, Appellant demanded and attempted to collect $6,095.92 in postpetition interest. Appellees filed a motion to reopen the bankruptcy case, which was granted, and filed the Motion requesting that the bankruptcy court enforce the discharge and permanently enjoin Appellant from collecting postpetition interest on the student loan debt.

On January 6, 1997, the bankruptcy court granted the Motion by minute order and entered its Order to Enforce Discharge and Permanent Injunction (the “Injunction Order”) on January 29, 1997. The bankruptcy court held that: (1) Appellant was bound by the language of the Plan and its failure to request postpetition interest in the Claim or object to the Discharge Provision constituted a waiver of any claim for postpetition interest; (2) Appellant had no claim for postpetition interest because the principal and pre-petition interest on the nondischargeable student loan debt was paid in full under the Plan; and (3) Bankruptcy Code (the “Code”)3 § 502(b)(2) did not permit Appellant to assert a nondischargeable claim for postpetition interest on the student loan because the debt was paid in full through the Plan.

Accordingly, the bankruptcy court ordered that Appellant “cease and desist in its collection efforts against Debtors ...” and “file the appropriate documentation with the various taxing credit bureaus, governmental agencies and taxing agencies that indicates that the student loan has been paid in full.” The bankruptcy court also ordered Appellant to pay attorney’s fees and costs to Appellees. On January 21, 1997, Appellant filed a premature notice of appeal .4

II.ISSUES ON APPEAL

1. Whether the bankruptcy court erred in holding that Appellant was precluded from collecting postpetition interest on the Claim because the Claim was paid in full under the Plan.

2. Whether the bankruptcy court erred in holding that Appellant, who faded to object to the Plan provision discharging postpetition interest on the Claim, was bound by the Plan even though the provision was contrary to the Code.

III.STANDARD OF REVIEW

We review conclusions of law, including the bankruptcy court’s interpretation of the Bankruptcy Code, de novo. See Grey v. Federated Group, Inc. (In re Federated Group, Inc.), 107 F.3d 730, 732 (9th Cir.1997) (citing Abele v. Phoenix Suns Ltd. Partnership (In re Harrell), 73 F.3d 218, 219 (9th Cir.1996)).

IV.DISCUSSION

A Appellant Was Not Precluded From Collecting Postpetition Interest On The Claim Because The Claim Was Paid In Full Under The Plan.

The bankruptcy court held that Appellant’s claim for postpetition interest on the Claim was discharged or extinguished by Appellees’ completion of the Plan, when the principal and prepetition interest was “paid in full.” We disagree.

Student loan debts are nondisehargeable in bankruptcy unless either the payment first became due more than seven years before the date of filing the bankruptcy petition, or the debtor can prove that excepting the debt from discharge will impose an undue [920]*920hardship. See 11 U.S.C. § 523(a)(8).5 This nondischargeability provision applies in chapter 13. Section 1328 states in pertinent part:

(a) As soon as practicable after completion by the debtor of all payments under the plan, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt
(2) of the kind specified in paragraph (5), (8), or (9) of section 523(a) of this-title;

11 U.S.C. § 1328(a)(2) (emphasis added).

However, the Code is silent as to whether postpetition interest on a nondisehargeable student loan is nondisehargeable in bankruptcy. The seminal case on this issue is Bruning v. United States, 376 U.S. 358, 84 S.Ct. 906, 11 L.Ed.2d 772 (1964). In Bruning, a ease decided under the Bankruptcy Act of 1898, the Supreme Court held that although postpetition interest on a nondis-chargeable tax debt could not be paid by the bankruptcy estate, it nevertheless survived bankruptcy and could be recovered personally from the debtor. Id. at 361, 84 S.Ct. at 908. The Court reasoned that “interest is an integral part of a continuing debt,” and becomes part of the debt itself. Id. at 360, 84 S.Ct. at 908. The Court distinguished between the disallowance of postpetition interest against the bankruptcy estate on a non-dischargeable debt, and the creditor’s right to recover postpetition interest on a nondis-chargeable debt from the debtor personally after the discharge has been entered. Id. at 362-63, 84 S.Ct.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In re: Reanna Leigh Irigoyen
Ninth Circuit, 2024
Schnitzel, Inc. v. Sorensen (In Re Sorensen)
586 B.R. 327 (Ninth Circuit, 2018)
In Re Mattson
468 B.R. 361 (Ninth Circuit, 2012)
In Re Victorio
454 B.R. 759 (S.D. California, 2011)
Grandstaff v. Casey (In Re Casey)
428 B.R. 519 (S.D. California, 2010)
In Re Burnett
427 B.R. 517 (S.D. California, 2010)
In Re Greene
359 B.R. 262 (D. Arizona, 2007)
In Re Montoya
341 B.R. 41 (D. Utah, 2006)
Sallie Mae Servicing Corp. v. Ransom (In Re Ransom)
336 B.R. 790 (Ninth Circuit, 2005)
In Re Liberate Technologies
314 B.R. 206 (N.D. California, 2004)
In Re Oak Park Calabasas Condominium Ass'n
302 B.R. 682 (C.D. California, 2003)

Cite This Page — Counsel Stack

Bluebook (online)
218 B.R. 916, 98 Daily Journal DAR 4135, 98 Cal. Daily Op. Serv. 2793, 1998 Bankr. LEXIS 446, 1998 WL 175746, Counsel Stack Legal Research, https://law.counselstack.com/opinion/great-lakes-higher-education-corp-v-pardee-in-re-pardee-bap9-1998.