A reader sent in the following statement regarding a case filed in Texas, “Just including a recent decision from the 5th circuit court of appeals that says Navient private student loans are discharged when bankruptcy is discharged, and that any contempt violation that occurred has to be in the court it happened.”
I’ve actually written about this case before.
At issue here is the status of private student loans that are included in bankruptcy. The United States Court of Appeals for the Fifth Circuit did conclude that not all private student loans are protected from discharge in bankruptcy.
The published opinion says, “Navient’s assertion that the 2005 amendment made all private student loans nondischargeable is not only unsupported by the text, it is unsupported by some of Navient’s authorities. Among them is Corletta v. Tex. Higher Educ. Coordinating Bd. (In re Pappas), 517 B.R. 708, 716–17 (Bankr. W.D. Tex. 2014).”
This case was centered around SLM Corporation, Sallie Mae, private student loans that Navient took over in some sort of assumption or servicing agreement.
This court position seems to affirm my 2013 post on the ability for some private student loans to be eligible for discharge in bankruptcy. It just takes some time to change public opinion to match the facts.
If you would like to read the entire appeals court document, it is below. But the key part of the case seems to be the following section:
“In conclusion, the only possibly applicable part of the relevant statute is Subsection 523(a)(8)(A)(ii). In interpreting that provision, we rely on the noscitur a sociis doctrine, the need to avoid surplusage, Congressional ratification in 2005 of prior interpretations, and the command that discharge exceptions are interpreted narrowly in favor of debtors. We conclude that “educational benefit” is limited to conditional payments with similarities to scholarships and stipends. The loans at issue here, though obtained in order to pay expenses of education, do not qualify as “an obligation to repay funds received as an educational benefit, scholarship, or stipend” because their repayment was unconditional. They therefore are dischargeable.”