Three Years Too Late for United Student Aid Fund

Today the Supreme Court announced it will hear the case of United Student Aid Fund v. Espinosa.  The case involves a question about procedures an individual most go through in order to reduce student loan debt as part of a bankruptcy proceeding.

Espinosa filed for Chapter 13 and the bankruptcy judge was able to reduce his loans from $17,823.15 to $13,250.  The Fund received notice of this plan and did not make any objections to it.

Three years after Espinosa’s filed for bankruptcy, the Fund claimed that Espinosa still needed to pay back the original loan of $17,823.15.  The Fund claims that they were allowed to revisit Espinosa’s case and ask for full payment because Espinosa never initiated a court hearing to settle the loan, but instead just asked the bankruptcy judge to reduce the amount.

Judge Kozinski, who wrote the opinion for the 9th Circuit, said that the Fund should have taken the opportunity to object to Espinosa’s bankruptcy plan when the Fund received notice three years ago.

The court will likely hear the case in November.