A financial agreement between a student and an educational institution is not considered a student loan and as a result in the bankruptcy case ( D’Youville Coll. v. Tucker (In re Tucker), the borrower was able to discharge her debt.
Judge Michael J. Kaplan of the U.S. Bankruptcy Court for the Western District of New York concluded that because the debt was not “an education benefit overpayment or a loan,” the exception to discharge under Bankruptcy Code Section 523(a)(8)(A)(ii) does not apply.
The financial agreement entered into between both parties was “no more than an agreement to pay for tuition, fees and other registration costs (whatever they turn out to be), at some unspecified future time, and not for an ‘educational benefit overpayment or loan’ as contemplated in §523(a)(8)(A)(i), the court said.
This case is similar to two other recent cases in the Western District of New York, with the exception that in this one, there was no promissory note signed by the debtor.
Exceptions to discharge under the Bankruptcy Code are construed narrowly and a creditor must prove by a preponderance of the evidence that its claim falls within one of those exceptions.
The court sided with the borrower in this case because it did not find a specific amount due in the financial agreement. The agreement contained a monthly interest provision and indicated that an adjustment would be made for financial aid received at a later time.
The financial agreement between the parties was “nothing more than a running account,” the court said.
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