Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 22

United Student Aid Funds, Inc. v. Espinosa
FACTS Francisco Espinosa filed a petition for an individual repayment plan under Chapter 13 of the Bankruptcy Code. His plan proposed to pay only the principal on his student loan and to discharge the interest. United Student Aid Funds, Inc. (the creditor), had notice of the plan and did not object. Without finding that payment of the interest would cause undue hardship (as required under the Code), the court confirmed the plan. Years later, however, United filed a motion under Federal Rule of Civil Procedure 60(b)(4) asking the bankruptcy court to rule that its order confirming the plan was void because the order was issued in violation of the laws and rules governing bankruptcy. The court denied United's petition and ordered the creditor to cease its collection efforts. United appealed, and the case ultimately reached the United States Supreme Court.
ISSUE If a bankruptcy court committed a legal error by confirming a debtor's repayment plan to discharge student loan debt without the required finding of undue hardship, but the creditor did not object, is the court's judgment void?
DECISION No. The United States Supreme Court affirmed the decision of the lower court that the bankruptcy court's order was not void and that the student loan debt was thus discharged.
REASON The Supreme Court pointed out that the bankruptcy court's order confirming Espinosa's proposed plan was a final judgment from which United did not appeal. Federal Rule of Civil Procedure 60(b)(4) authorizes a court to relieve a party from a final judgment if that judgment is void, but a judgment is not void simply because it is or may have been erroneous. Moreover, a motion under this rule is not a substitute for a timely appeal. "The Bankruptcy Court's failure to find undue hardship before confirming Espinosa's plan was a legal error. But the order remains enforceable and binding on United because United had notice of the error and failed to object or timely appeal."
CRITICAL THINKING-Ethical Consideration At one point, United argued that if the Court did not declare the bankruptcy court's order void, dishonest debtors would be encouraged to abuse the Chapter 13 process. How might such abuse occur, and should the possibility of such abuse affect the Court's decision? Discuss your answer.