It is fairly well settled and well known that public and private student loans are nondischargeable pursuant to Section 523(a)(8) of the Bankruptcy Code, unless the debtor meets the high bar of showing "undue hardship."  This section states the following:

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) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—

(A)  (i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.

Although there are fewer cases on point, the statute also includes loans for a private day school for a debtor’s children.  In The Rabbi Harry H. Epstein School, Inc v. Goldstein, Adv. Proc. No. 12-5186, 2012 Bankr. LEXIS 6034 (Bankr. N.D. Ga. November 26, 2012)(J. Diehl), the debtor had three minor children who attended the day school.  Debtor entered into a standard contract to pay tuition and fees for each child, in the amount of $42,270.  Debtor subsequently entered into an agreement with the school to pay over time due to his financial circumstances. 

Debtor argued that the arrangement should not be characterized as a loan or financing of tuition.  Judge Diehl, using the common law meaning of the term "loan," held that the agreements did constitute education loans.

First, the Alternative Terms constitute a valid contract. The Alternative Terms created a legal obligation between the parties where the Debtor agreed to pay the School the remaining balance of the tuition and fees, plus a $200 financing fee, over a 10-month period in exchange for his children attending the School for the 2011-12 academic year before he completed his payments. In fact, Debtor admitted in his Answer "[t]he Enrollment Contracts, as modified or supplemented by the Alternative Terms, constitute contracts between Epstein, on one hand, and Mr. Goldstein and [the children’s mother], on the other hand." (Answer,¶ 31).

Second, the School provided a "defined quantity of" educational services, namely one academic year of private schooling, to the Debtor’s children under the Alternative Terms. It is undisputed the Debtor’s children consumed these educational services by attending the accredited School. (Answer, ¶¶ 4, 11). Therefore, the second requirement of a common law loan – that one party transferred "a defined quantity of money, goods, or services, to another" – is satisfied…Third, the Debtor agreed under the Alternative Terms to pay the remaining tuition and fees "at a later date" through an installment payment plan that extended over several months.

 The Court also held that the debt was excepted from discharge.

Section 523(a)(8)(A) exempts from discharge all educational loans, not just loans for higher education. Even though the loan incurred by Debtor financed his children’s primary education from a private day school, it is still excepted from discharge under § 523(a)(8)(A). Congress expanded the scope of § 523(a)(8) over the years, broadening its application from higher education loans exclusively to educational loans generally…  Congress deleted the clause "higher education" from § 523(a)(8) in 1984, "eliminat[ing] the inference that the section applied only to nonprofit institutions associated with higher education." … Congress amended the section again in 2005 as part of The Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA") by separating clauses § 523(a)(8)(A)(i) and (ii), broadening again the "range of educational benefit obligations" covered by the section due to the expansive language of § 523(a)(8)(A)(ii)…

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