44. In Corbin, the debtor was a receptionist for Greenpoint Technologies, and the vice-president of the company agreed to cosign the debtor’s application for a student loan. Corbin, 506 B.R. at 290. Corbin used the proceeds to fund her educational expenses but ultimately left her employment at Greenpoint and defaulted on the loan; the vice-president stepped in and made payments on the loan “to avoid adverse effects on her own credit rating.” Id. The vice-president sought and received a judgment against Corbin in state court. Id. When Corbin later filed bankruptcy, she attempted to discharge the judgment under, among other provisions, § 523(a)(8)(A)(ii). Id. The court noted that a debt is nondischargeable as an “educational benefit” under this subsection if “the stated purpose for the loan is to fund educational expenses.” Id. at 296 (citation omitted). Referencing Into the lso are Belforte, the court found that there was “no business purpose to the [l]oan on either the part of [the vice-president] or Corbin.” Id. at 297 (citing During the re Belforte, Nos. 10-22742, 11-1008, 2012 WL 4620987, at *7 (Bankr. D. Mass. )). Instead, the funds were received to pay for educational expenses and the vice-president received “no consideration for her signature.” Id. at 297. Id.
45. Thus, in applying the substance of the transaction test to this case, it is clear that the Jubers issued a private loan to the Debtor that served a personal purpose rather than an educational one. Unlike the vice-president in Corbin, the Jubers did have an ulterior motive for using the HELOC to pay off the Three Original Loans: a love for their son and a desire to financially support his impending marriage.
46. The Jubers requested attorney’s fees in this case and cited to the language of the Promissory Note that allowed for the same. Based on well-established case law, however, an award of attorney’s fees to the Jubers would not be appropriate given the court’s ruling in favor of the Debtor. Select Within the lso are Kelly, 582 B.R. 905, 914 (Bankr. S.D. Tex. 2018); Bank out of Am. v. Grain, 244 N.C. 358, 375 (N.C. Ct. App. 2015).
A brief history of your own exchange involved combined with the history within functions, simply leaves little doubt that the Dental Financing is neither longer since nor intended to be an educational loan. New Jubers cannot beat the fresh new basic language off § 523(a)(8)(B) or the legislative history that tunes the manufacture of and you may amendments in order to § 523. An application of the brand new material of your own transaction sample next bolsters the brand new court’s conclusion your Jubers’ goal, even in the event reasonable, is ultimately perhaps not meant to help the Borrower but, as an alternative, the kid. For this reason, the latest Dental Loan, together with after that Promissory Notice, is actually dischargeable about Debtor’s bankruptcy instance and also be addressed as the a general personal debt on the Debtor’s Chapter thirteen plan. The fresh new legal tend to get into a special wisdom in line with this purchase.
4. New Jubers’ provide with the Debtor are twofold. Transcript in the 108. 5% because rate of interest into the HELOC was just step one.99%. Transcript during the twelve. The fresh new Jubers believed that if you are paying from the Debtor’s Three Modern Loans toward HELOC, the fresh Borrower and their guy create take advantage of the lower interest rate and then provides a lower dominating balance when they married. Transcript on 13, sixteen. In return, the newest Jubers expected brand new Borrower to help you agree to spend $five hundred biweekly until it decided to offer their residence (the fresh “Oral Mortgage”). Transcript at the 18. New Jubers planned to sell their home in the near future and you can perform at some point have to pay off of the HELOC prior to closing. Transcript in the 19-20, 31. As a result, at the end of which approximately a dozen-week term, brand new Jubers know your Debtor and their son, together, do refinance the remaining principal, albeit rather smaller by the Dental Mortgage. Transcript at the a dozen, 18. Especially, which exchange perform exists after the Borrower additionally the Jubers’ Son wed, additionally the Jubers assumed you to its son will have to cosign on loans. Transcript at the 19, forty two.
Basic, the Jubers desired to trigger their residence security credit line (the fresh “HELOC”) to pay off the 3 Brand spanking new Money
10. To the , the latest Borrower submitted a section thirteen case of bankruptcy petition. The latest Jubers commenced that it opponent proceeding on the seeking to categorize the new Debtor’s indebtedness, since portrayed because of the Dental Loan and also the further Promissory Note, because nondischargeable financial obligation sustained while the a good re-finance off a qualified education mortgage less than § 523(a)(8) of your own Bankruptcy Password and you can § 221(d) of your own Inner Cash Password.
fifteen. The newest provision of the password under consideration in this instance try eleven U.S.C. § 523(a)(8)(B). Section 523(a)(8) traces numerous types of student debt which are excluded away from discharge, including one obligations to have:
The Jubers knew that the adjusted mediocre of your interest levels towards the Around three Totally new Finance is as much as 9
20. The Oliver court began by looking at the history of § 523(a)(8) as laid out, more thoroughly, in In re Compartments, a 2003 case from the Seventh Circuit, that had facts analogous to those in Oliver. Id. at 621-22 (citing Inside the re Spaces, 348 F.3d 650, 652-58 (7th Cir. 2003)). In Chambers, the court found that an unpaid balance on a student account was not a loan at all, so it was dischargeable under § 523(a)(8). Chambers, 348 F.3d at 658. The Oliver court highlighted that Chambers “expressly left to Congress the opportunity ‘to protect any educational “extension of credit” ‘ ” and expand the statute if it so chose. Oliver, 499 B.R. at 622 (quoting Chambers, 348 F.3d at 657).
25. Here, the Jubers were not extending credit, as an institutional lender would, to fund an education by paying for tuition, housing expenses, books, technology fees, meal plans, study-abroad, and the like. Unlike the lender in Pelzman, 233 B.R. at 580, the Jubers did not aim to facilitate the Debtor’s education or allow the Debtor to pay for costs incidental to her education. Instead, the Oral Loan was personal in nature. It was extended to the Debtor as a means of helping the Juber’s Son. At trial, Mr. Juber testified that the loan was made so that his son and future daughter-in-law could start their marriage on the right foot. Mr. Juber admitted that the loan would benefit both his son and the Debtor and would help their financial situation in the long run. The Debtor did not seek the loan from the Jubers. Rather, the Jubers approached the Debtor about this opportunity and framed the offer as one to benefit the pending marriage. The Oral Loan was the Jubers’ good-hearted, albeit misguided, attempt to get rid of debt their son could ultimately be responsible for online payday loans Humble Texas upon marriage. It was not educational in nature.
43. Courts have also applied an analysis similar to the substance of the transaction test in cases examining the “educational benefit” language of § 523(a)(8)(A)(ii) by looking at whether a loan serves a “business purpose or an educational purpose.” Find, age.g., Benson v. Corbin (In the lso are Corbin), 506 B.R. 287, 297 (Bankr. W.D. Wash. 2014).
