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ICYMI: Student loans in bankruptcy November 2017 [Jimenez]

December 28, 2017

Case info: Jimenez v. Navient Solutions, LLC, 2017 WL 5592260 (Bankr. S.D. Tex. Nov. 20, 2017)

Case opinion: Download

TL;DR: A bankruptcy court retains jurisdiction to enforce a discharge order it entered. Duh. And a debtor pleads sufficient facts to show a student loan creditor may have violated a discharge injunction if she alleges the creditor (a) knew she got a discharge and (b) still tried to collect from her post-discharge.

Navient’s motion to dismiss for lack of subject matter jurisdiction: denied. Navient’s motion to dismiss for failure to state a claim: denied.

Related: Everything you need to know about student loans in bankruptcy November 2017

My ex aint shit

Nicole Jimenez borrowed a bunch of money to pay for school. When all was said and done, Navient said she owed almost $300 thousand.

sad baby

That number bothered her. She didn’t think she owed that much. So she started looking into the loans. What she found after a little digging was that her ex-husband fraudulently signed her name to at least one loan.


Jimenez contacted Navient to let them know of the fraud. But they didn’t care. They just wanted their money. So they kept calling, trying to collect from her.


At some point, Jimenez was like, “Okay Navient. Since you won’t leave me alone, I’m going to go ahead and reopen that chapter 13 case I filed some time ago so I can file an adversary proceeding to try and discharge all of my student loans — including the one my ex-husband signed my name to.”


Procedural posture

In her adversary, Jimenez made two claims. First, repaying the loans would cause an undue hardship to her and her dependents. Second, Navient violated the discharge injunction by attempting to collect from her. Navient responded by moving to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted.

What the court said

GTFOH. To both of Navient’s motions. Let’s start with the one about jurisdiction.

Navient argued that the bankruptcy court lacked jurisdiction to hear the AP because education loans aren’t dischargeable. The court told Navient to go back to the office and reread the Code and rules, specifically 11 USC §§ 350(b), 157(a), 157(b)(2)(1), and rule 4007(b).

Next, the court turned to Navient’s motion to dismiss. Navient gave two arguments as to why it couldn’t have violated the discharge injunction. The first was that it couldn’t have violated the discharge injunction because all of Jimenez’s education loans were nondischargeable. The court rejected that argument because it ignored why Jimenez filed the adversary in the first place: she alleged one of the loans was discharged because her ex-husband signed her name, without her consent, as a co-signer. Her husband’s fraud, if proven, would remove the debt from the nodischargeability protections of § 523(a)(8).

The second argument was that Navient couldn’t have violated the discharge injunction for collecting a debt that doesn’t exist (i.e., because of fraud) because a phantom debt can’t be discharged. The court cackled at the argument. Loudly.

There are only two things a debtor must prove to show the discharge injunction has been violated:

  • The creditor knew of the injunction; and
  • The creditor intended to commit the act that violates the injunction.

Jimenez pled sufficient facts to establish those two elements. So Navient’s motion to dismiss was denied.

What’s the impact

Spouses, family members, friends, shit…people, sign other folks names to loans and other types of debts all.the.time.

Because of that reality, I can see someone arguing as Jimenez did here: an education loan obtained by fraud is not excepted from discharge under § 523(a(8). The tough thing about that argument is that you have to prove the fraud.

And how do you do that?

Sure, if you can get the person to admit they did it, then you’re done. But absent that, what do you do? I guess you could produce a hand writing sample or show that you never got the money or prove you were somewhere else when the document was signed. In any event, I imagine, proving fraud will be hard. But it can’t be harder than proving undue hardship.