Tenth Circuit Ruling May Impact Treatment of Student Loans In Bankruptcy

The McDaniels filed a voluntary Chapter 13 bankruptcy petition, and disclosed, among other debts, that they had federally insured student loans, as well as a number of private student loans with Sallie Mae, Inc. (now Navient). Throughout the course of their Chapter 13 bankruptcy, the McDaniels paid nearly $27,000 in principal toward the $200,000 that they owed to Navient. Upon completion of their plan payments, the bankruptcy court issued an order granting the McDaniels a discharge of their debts, but did not specify which debts were or were not discharged. As to the student loans, the order simply stated that "debts for most student loans" were not discharged.

In the two years following their discharge, the McDaniels paid an additional $37,000 to Navient toward satisfaction of their private student loans. That ended, however, when the McDaniels reopened their bankruptcy case and filed a complaint against Navient seeking a declaration by the bankruptcy court that their Navient loans had been discharged, and sought an award of damages based upon Navient's post-discharge collection activities.