Guarantor May Contest Dischargeability
of Student Loan
A
guarantor on a student
loan is an “accommodation
party” who comes within
the purview of the student loan
nondischargeability provision when
she is required to pay the loan on
behalf of the debtor. De la Rosa v.
Kelly (In re Kelly), No. 17-32295,
Adv. Proc. No. 17-3320 (Bankr.
S.D. Tex. March 23, 2018).
Mary De la Rosa was the guarantor
on a student loan acquired by her
friend and fellow church member,
Tabitha Kelly. When Ms. Kelly
defaulted on the loan, the lender
sued Ms. De la Rosa and she
paid the debt pursuant to a state
court judgment. Ms. Kelly and her
husband later filed for chapter 13
bankruptcy and Ms. De la Rosa
filed an adversary complaint
seeking to have the debt deemed
nondischargeable under section
523(a)(8)(A)(ii).
The question before the court
was whether Ms. De la Rosa, as
an “accommodation party” under
Texas law who did not personally
benefit from the loan, could benefit
from
the
nondischargeability
provision. In finding that she could,
the court discussed the analogous
cases of Benson v. Corbin (In re
Corbin), 506 B.R. 287 (Bankr.
W.D. Wash. 2014), and Brown v.
Rust (In re Rust), 510 B.R. 562
(Bankr. E.D. Ky. 2014), where the
courts were persuaded in large
part by congressional intent to
expand protection
of student loan
creditors
to
nongovernmental
lenders when it
enacted
section
523(a)(8)(A)(ii).
In Corbin, the court
found the student
loan debt paid by
the guarantor was
nondischargeable
as between the
debtor and the
guarantor because
“the provision of an
accommodation, in
order to secure for
a student funds
for the purpose of
paying educational
expenses, gives
rise to an obligation
on the part of the
debtor to repay
funds received as
an education benefit
once the co-signer is required to
honor its obligation to pay the debt.”
Likewise, the Rust court found that
because many student loan lenders
will not advance the loan without
the signature of a guarantor,
treating the debt to the guarantor
as
nondischargeable
furthers
congressional intent to make
student loans available to those
who might otherwise be unable to
obtain one.
National Association of Consumer Bankruptcy Attorneys
Spring 2018
A
company
The court found the debt
nondischargeable. It declined,
however, to award attorney’s fees
to Ms. De la Rosa in the absence
of any basis for deviating from the
American Rule.
De la Rosa Bankr SD Tex opinion
March 2018
CONSUMER BANKRUPTCY JOURNAL
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