Debt For Military Education Not Dischargeable

July 13, 2006

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”


15 Responses to “Debt For Military Education Not Dischargeable”

  1. Vhai Says:

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  2. Jack Payne Says:

    “Unless there is an undo hardship?” This caveat is so much a part of so many judicial opinions that it almost renders the meaning of any judgment worthless.

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  7. Thanks for the post! That is really good but I want to know that is this also applicable for the students other than going through military education.

  8. The U.S. Court of Appeals for the 3rd Circuit rules this week that a former Air Force Cadet could not discharge his obligation to reimburse the government for his education.
    Nathan Udell had completed three academic years at the Air Force Academy when misconduct led him to resign to avoid being involuntarily separated from the service. He filed a bankruptcy petition seeking to discharge $123,692 in reimbursement debt.

    The bankruptcy court discharged the debt, relying on a provision in the Armed Forces Code which provided that such debt could not be discharged within a five year period.

    The Court of Appeals, however, ruled that the prohibition on discharging debt within five years did not mean that the debt could be discharged after five years. Instead, the statute created a further restriction, preventing discharge of the debt within five years even if it would otherwise have been dis-chargeable in bankruptcy.

    Once outside the five year period, the Court of Appeals ruled, the debt was subject to the same provisions as any other educational debt owed to or guaranteed by the U.S. government–and that meant no discharge unless “undue hardship” had been demonstrated.

  9. In fairness to the third circuit, isn’t the loan the soldgier obtained really in the spirit of a student loan? Or at least a loan that is not supposed to be discharged per the law?

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  11. Bankruptcy Says:

    Yap i am agree with you about bankruptcy for Military Education. US military is best as everyone knows.

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