Prepare a 2-3 page, double-spaced paper explaining the three key chapters of the U.S. Bankruptcy Code (7, 11, and 13), and how each chapter operates in our bankruptcy court system. Do individuals/corporations filing for bankruptcy progress through more than one of these chapters? A question you must cover in your paper concerns the effect that both petitioners' student loans have in their bankruptcy filing. Research the Internet, and gather statistics on the number of students being forced into personal bankruptcy as a result of federal student loans.
- Between 1980 and 1987, Craig Hanson borrowed funds from Great Lakes Higher Education Corp. to finance his education. Hanson defaulted on the debt in 1989, and Great Lakes obtained a judgment against him for $31,583.77. Three years later, Hanson filed a bankruptcy petition under Chapter 13. Great Lakes timely filed a proof of claim in the amount of $35,531.08. Hanson's repayment plan proposed to pay $135 monthly to Great Lakes over 60 months, which in total was only 19 percent of the claim, but said nothing about discharging the remaining balance. The plan was confirmed without objection. After Hanson completed the payments under the plan, without any additional proof or argument being offered, the court granted discharge of his student loans. In 2003, Educational Credit Management Corp. (ECMC), which had taken over Great Lakes' interest in the loans, filed a motion for relief from the discharge. What is the requirement for the discharge of a student loan obligation in bankruptcy? Did Hanson meet this requirement? Should the court grant ECMC's motion? Discuss. In re Hanson, 397 F.3d (7th Cir. 2005).
- Between 1988 and 1992, Lorna Nys took out student loans, totaling about $30,000, to finance an associate of arts degree in drafting from the College of the Redwoods and a bachelor of arts degree from Humboldt State University (HSU) in California. In 1996, Nys began working at HSU as a drafting technician. As a "Drafter II," the highest-paying drafting position at HSU, Nys's gross income in 2002 was $40,244. She was 51 years old, her net monthly income was $2,299.33, and she had $2,295.05 in monthly expenses, including saving $140 for her retirement, which she planned for age 65. When Educational Credit Management Corp. (ECMC) began to collect payments on Nys's student loans, she filed a Chapter 7 petition in a federal bankruptcy court, seeking a discharge of the loans. ECMC argued that Nys did not show any "additional circumstances" that would impede her ability to repay. What is the standard for the discharge of student loans under Chapter 7? Does Nys meet that standard? Explain. In re Nys, 446 F.3d 938 (9th Cir. 2006).