Here’s a very brief summary; the full opinion is available at http://www.supremecourt.gov/opinions/09pdf/08-1134.pdf.
Facts: A Chapter 13 debtor proposed a plan that would discharge a portion of his student loan debt without filing an adversary proceeding as required by Rule 7001(6). The United Student Aid Funds never objected to the plan (though it had notice of the plan and the confirmation hearing). The plan was confirmed and completed. After completion of the plan, the Department of Education (which had been assigned the note under its reinsurance agreement with United Student Aid Funds) attempted to collect the unpaid portion of the debt, and the Debtor filed a motion in the Bankruptcy Court seeking to enforce the discharge injunction.
Issue: Whether the Chapter 13 plan and discharge were void because: (1) debtor failed to file an adversary proceeding seeking to determine the dischargeability of the debt as required by the Federal Rules, (2) the Bankruptcy Court never found undue hardship as required by 11 U.S.C. 523(a)(8), and/or (3) United Student Aid Funds’ due process rights were violated.
Holding: (1 & 2) Although the Bankruptcy Court may have erred by failing to find undue hardship and by confirming the plan, the plan was not void ab initio. Because United Student Aid Funds failed to file a direct appeal in the context of the plan confirmation, it had essentially lost its ability to challenge the plan and the discharge order. (3) Although an adversary proceeding provides greater notice and more rights to the parties, United Student Aid Funds received notice of the plan and its confirmation. Its rights to due process, therefore, were not violated.
