The Court of Appeals for the Fifth Circuit has ruled that a bankruptcy court did not err in discharging certain types of student loans during bankruptcy proceedings and that a bankruptcy court does not have the authority to enforce discharge injunctions entered into in other courts, remanding the case back to the District Court.
A copy of the ruling in the case of Crocker v. Navient Solutions can be accessed by clicking here.
Two individuals — one in Texas and the other in Virginia — obtained private student loans that ultimately ended up being serviced by the defendant. Both later filed for bankruptcy protection in their respective states. The defendant attempted to continue collecting on the unpaid student loans after they were discharged. The individual in Texas filed suit against the defendant and the individual from Virginia later joined the suit. The suit sought to certify a class of individuals who had validly discharged loans but were still being subjected to collection efforts of the defendant.
The defendant filed for summary judgment, arguing that bankruptcy courts can not enforce the injunctions of discharge orders from other states and that the loans should have been excluded from being discharged. The bankruptcy court ruled in favor of the plaintiffs on both counts, a decision the defendant appealed to the Fifth Circuit.
In issuing its ruling, the Fifth Circuit decided that bankruptcy courts do not have the authority to enforce discharge injunctions from other districts, but agreed with the District Court that the particular loans “are not statutorily excepted from discharge.”
