Bankruptcy Lawyers Blog: 3rd Circuit Rules Reimbursement Debt for Military Education Not Dischargeable

The 3rd Circuit has ruled the military equivalent of a student is not dischargeable. A former student of the Air Force Academy challenged the debt repayment for his education after leaving the Academy without completing courses or his debt of service to the armed forces.

The cost of the education then became due, although not typically considered to be a student loan.

The 3rd Circuit treated the loan as one that fit the plain language of non-dischargeable debts under the code as being a debt

“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 excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents”


Stephen Yagman, a civil rights attorney in Los Angeles, has been indicted on bankruptcy fraud charges. The lawyer has filed many civil rights suits including suits against the Los Angeles County Sheriffs Office.

KESQ NewsChannel 3 Palm Springs, CA: LA attorney indicted on money laundering, bankruptcy fraud charges

Eliot Spitzer has sued several New York debt collectors for abusive debt collection. Read the full story at Bill McLeod's Law Blog – Mcleod Law Offices, P.C.- Massachusetts Bankruptcy, Employment Law and Fair Debt Collection Practices Attorneys in Boston

The suit alleges that the Boyajian companies (1) used dunning letters and falsely stated or implied that they came from attorneys; (2) falsely accused debtors of criminal activity, and threatened debtors with arrest; and (3) failed to supply verification of the debt when requested to do so.

In addition, they were apparently trying to collect on bad checks which were more than 6 years old – and in New York, the statute of limitations for bringing such a claim is 6 years. According to a report here the outfits were apparently collecting checks made payable to Ames and Bradlees, two retailers than have long since been out of business.

Goldman Sachs has hired James H. M. Sprayregen, from Kirkland and Ellis to run its restructuring practice. What does this mean to the rest of world?

Not alot unless you’re a bankruptcy and you want to use his new salary to make you feel inferior… or it means a ton if you are financial market analyst.

The hiring should be a sign of the times that the corporate bankruptcies are going to start flying. With market roller coaster rides like we’ve had recently, the hiring is a further indicator of a tentaive market at best.

Getting Help to See the Sunshine Through the Rain – New York Times

Recent Supreme Court majority in the case of Howard Delivery Serv., Inc. v. Zurich American Ins. Co. is strange at best with Justices Scalia and Thomas joining among others, Justice Ginsburng, who had this to say in the 6-3 decision regarding preference payments

In holding that claims for workers' compensation insurance premiums do not qualify for § 507(a)(5) priority, we are mindful that the Bankruptcy Code aims, in the main, to secure equal distribution among creditors. We take into account, as well, the complementary principle that preferential treatment of a class of creditors is in order only when clearly authorized by Congress….[W]e are guided in reaching our decision by the equal distribution objective underlying the Bankruptcy Code, and the corollary principle that provisions allowing preferences must be tightly construed…. Any doubt concerning the appropriate characterization [of a bankruptcy statutory provision] is best resolved in accord with the Bankruptcy Code's equal distribution aim. We therefore reject the expanded [i.e., "plain meaning"] interpretation Zurich invites. (Citations omitted.

New York City may be getting ready to take on a few debt collectors.

Bill McLeod's Law Blog – Mcleod Law Offices, P.C.- Massachusetts Bankruptcy, Employment Law and Fair Debt Collection Practices Attorneys in Boston

In response to a 70 percent increase in consumer complaints in two years, the New York City Department of Consumer Affairs held information gathering hearings, and may propose tighter restrictions on debt collecting agencies.

BAPCPA Outline

June 14, 2006

The long awaited and promised world’s most comprehensive outline of BAPCPA is now available: Bankruptcy Litigation Blog: BAPCPA Outline: Part I, Section B – Judicial Commentary: BAPCPA’s “Plain Meaning” Not Followed

According to Mohave Daily News: Business, bankruptcy filings in Arizona dropped like a rock in the first four months of the year.

From January through April 2005, 10,592 filings were reported by the U.S. Bankruptcy Court of Arizona. The same period this year saw only 1,777 cases, of which 1,374 were so-called ‘‘Chapter 7'' liquidation filings.

‘‘For April, we're almost 84 percent below what we had for the same month last year,'' said Terrence Miller, clerk of the U.S. Bankruptcy Court of Arizona.

‘‘Year to date, we're about 83 percent below. We had that large upsurge right before the new law took effect . . . so we're finishing up working through all those cases.''

With figures like 83 percent below previously levels, you will soon see courts laying off personnel. The courts are already on tight budgets that are tied to case loads.

Watch the chapter 13 trustee's office, notrious for their large staffs, to also start laying people off right and left.

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Most bankruptcy info seems to come from the U.S., probably because the U.S. has the most sophisticated (and complicated after the new law was passed) bankruptcy law in the world.

Here is an interesting article about bankruptcy in the U.K.: One million face bankruptcy in UK – Irna

Some of the figures seem to parallel U.S. filings,

  • $18,000 average unsecured debt
  • low interest rates and easy credit entice debtors
  • most U.K. debtors site overspending as the basis for excess debt
  • Unemployment, redundancy, illness, divorce, leaving work to have a child and loss of overtime were also listed as factors

Pennsylvania filings are increasing and this could be part of a national trend.

“There was a lot of confusion about whether bankruptcy would go away.
People are now starting to realize that bankruptcy is still an option
to those under extreme financial duress, said bankruptcy attorney
Stephan Nikoloff, of Legal Helpers, a law firm specializing in consumer
bankruptcy. “The majority of people who could file for bankruptcy prior
to the law change can still file under the new law.”

This only makes sense as the down cycle couldn’t last that long, at least that’s what most bankruptcy lawyers have been theorizing.

There were two ways to look at it really

  1. Everybody filed pre-new law
  2. Everybody is afraid to file now

Both reasons will work themselves out and most of the pre-new law levels will probably return, one would think. Once the lawyers tweak everything out, the new bankruptcy law will be a lot thinner and easier to work with anyway.