[00:00:06] Speaker 00:
I'm short.

[00:00:07] Speaker 00:
I'm going to put this way down here.

[00:00:09] Speaker 00:
Good morning, Your Honors.

[00:00:11] Speaker 00:
I would like to reserve four minutes for rebuttal.

[00:00:17] Speaker 00:
May it please the court, this case, this appeal presents a pure question of statutory interpretation under 11-523-A8B.

[00:00:27] Speaker 00:
and issues somewhat of first impression in this circuit.

[00:00:31] Speaker 00:
The question is whether this informal mixed-use family loan satisfies Congress's narrow and technical definition of a qualified education loan.

[00:00:41] Speaker 00:
It does not.

[00:00:43] Speaker 00:
It fails for two independent dispositive reasons, either of which requires reversal, not remand.

[00:00:50] Speaker 00:
The first loan, sorry, first the loan was not incurred solely to pay for higher education expenses.

[00:00:57] Speaker 00:
as Congress unambiguously requires.

[00:01:01] Speaker 00:
Second, Dr. Pearson was not an eligible student at an eligible educational institution because federal regulations rendered his medical program, his foreign medical program title for ineligible when he attended North Rumbria in England.

[00:01:19] Speaker 00:
The main campus of St.

[00:01:20] Speaker 00:
George's Medical School is in Granada in the Caribbean.

[00:01:24] Speaker 00:
Appellee's reply confirms that they are asking this court to rewrite the statute, disregard binding regulations, and expand the non-dischargeability far beyond what Congress has authorized.

[00:01:38] Speaker 00:
Solely means exclusively.

[00:01:41] Speaker 00:
The text controls 523A8B incorporates IRS code or IRC code 221D1.

[00:01:50] Speaker 00:
Congress defined a qualified education loan as indebtedness incurred solely to pay for qualified higher education expenses.

[00:01:59] Speaker 00:
Congress did not say primarily.

[00:02:01] Speaker 00:
Congress did not say mostly.

[00:02:03] Speaker 00:
It said solely.

[00:02:04] Speaker 00:
And the bankruptcy court found that this was a mixed use loan.

[00:02:12] Speaker 00:
The bankruptcy court found that $266,000 of 331,000

[00:02:19] Speaker 00:
of the judgment that was loaned was used for tuition.

[00:02:25] Speaker 00:
The remainder of that amount was not used for tuition.

[00:02:28] Speaker 00:
It was used to pay for pre-medical coursework, living expenses, travel.

[00:02:33] Speaker 00:
Funds were transferred informally without restriction, and those funds were deposited

[00:02:40] Speaker 00:
and not into the debtors bank account but into the nickels, the lenders and appellees here.

[00:02:47] Speaker 00:
They deposited that into a joint account with their daughter and then she would transfer money for tuition.

[00:02:55] Speaker 01:
Council, you say mixed use loan.

[00:02:58] Speaker 01:
Yes.

[00:02:59] Speaker 01:
And throughout it, you know, there's a finding stipulation that there is a loan.

[00:03:03] Speaker 01:
But going through the record, there's all sorts of transfers.

[00:03:07] Speaker 01:
So why is this a loan as opposed to loans?

[00:03:11] Speaker 01:
Because as I understand it, a lot of the money was transferred at the time, you know, tuition was about to be due or so forth.

[00:03:19] Speaker 01:
So you have a loan for the undergraduate education that may not qualify but then you have a second or seventh transfer, whatever it would be when medical school started.

[00:03:33] Speaker 00:
Bound by the stipulation that it is just one loan I think that's a good question your honor and it highlights an area that I want to address First there is no contract though.

[00:03:47] Speaker 00:
This was oral there are no Written contracts there are no promissory notes there were no payment terms and

[00:03:54] Speaker 00:
there was no restrictions on the use of the funds.

[00:03:58] Speaker 00:
Those were just transfers made.

[00:04:00] Speaker 00:
So to say that there was one loan or multiple loans is hard to do because there were so many different transfers.

[00:04:09] Speaker 00:
And I think that falls to the nickels in this matter.

[00:04:14] Speaker 00:
They were sophisticated business people, you know, ran a multimillion dollar business.

[00:04:20] Speaker 00:
And they knew, you know, they've dealt with lawyers before, they knew,

[00:04:23] Speaker 00:
that they could have done a contract here, and in this case, there was no contract.

[00:04:29] Speaker 00:
And I think that's important to note.

[00:04:31] Speaker 00:
There's a burden there on the lender to have a contract, but there's also benefits and protections that should have been there for them, and it should have been there for Dr. Pearson.

[00:04:45] Speaker 00:
Dr. Pearson had it then a title for

[00:04:48] Speaker 00:
student loan or even a private lender that did a Title IV loan, there would have been opportunities for forbearance, for deferment, for forgiveness if he had taken a position in an underserved area.

[00:05:05] Speaker 00:
None of those guardrails, none of those safeguards were in place for either party.

[00:05:14] Speaker 03:
It's is it true to the evidence that was presented words basically the transfers from the nickels into an account with the daughter You don't have any other records about how the money was transferred out of that account into the joint account between the debtor and the daughter Stephanie and then the only other evidence is the actual tuition statements for the

[00:05:40] Speaker 03:
time he was at either St.

[00:05:41] Speaker 03:
George University or at St.

[00:05:43] Speaker 03:
George University Medical School.

[00:05:45] Speaker 00:
That is correct, Your Honor.

[00:05:47] Speaker 00:
That was the evidence at trial.

[00:05:48] Speaker 00:
So there was nothing not established.

[00:05:50] Speaker 00:
There were multiple loans in this matter and the lower court, sorry, the state court had determined that it was a loan and not a gift.

[00:05:59] Speaker 03:
And it was a loan for $331,500.

[00:06:01] Speaker 00:
That is correct, Your Honor.

[00:06:10] Speaker 00:
The appellee's reply confirms the error that was made.

[00:06:13] Speaker 00:
Appellees argue that actual use of those funds is irrelevant and that the only relevancy was the purpose of the loan.

[00:06:22] Speaker 00:
But that argument doesn't appear in the statute.

[00:06:25] Speaker 00:
Congress used an objective criteria, not a subjective intent criteria.

[00:06:34] Speaker 00:
Further, there were treasury regulations that removed doubt around that issue.

[00:06:40] Speaker 00:
26 CFR section 1.221-1 expressly states that a mixed use loan is not qualified and provides an example that is almost exactly like this case for the after to understand the after the fact parsing of the appellee's purpose for the loan.

[00:07:02] Speaker 00:
The bankruptcy court's ratio test and the appellee's series of loans theory appear nowhere in the statute or the regulations.

[00:07:10] Speaker 00:
the mixed use is absolutely prohibited.

[00:07:13] Speaker 00:
And we want that to be prohibited.

[00:07:16] Speaker 00:
If you think about it, you could have a lender come in and say, we'll give you loans to get your law degree, and you can do a home remodel at the same time.

[00:07:26] Speaker 00:
And if those are under the same loan, and there's financial problems, and that debtor goes to file for bankruptcy, or that borrower goes to file for bankruptcy, they are now paying a non-dischargeable loan for home improvements.

[00:07:40] Speaker 00:
That was not the intent under Title IV, and it was made clear that's why those types of loans are not eligible.

[00:07:47] Speaker 00:
Appellee's reply also makes clear that there's a conflict.

[00:07:55] Speaker 00:
They state that the program eligibility is irrelevant and that 34 CFR section 600.55H has no connection to dischargability.

[00:08:07] Speaker 00:
But that position is legally untenable.

[00:08:09] Speaker 00:
Congress required that the student be an eligible student.

[00:08:14] Speaker 00:
And under Section 221D1C of the IRC, it requires that the expenses be attributable to education furnished during a period in which the recipient was an eligible student.

[00:08:27] Speaker 00:
Eligible student is defined by the Higher Education Act, which expressly ties eligibility to Title IV participation.

[00:08:36] Speaker 00:
Eligibility is defined by regulations and Congress gave the Department of Education the authority to write those regulations so that it could carry out the purpose of Title IV lending.

[00:08:47] Speaker 00:
No portion of a foreign medical school, foreign medical education program other than clinical training may be located outside the country of the main campus.

[00:08:59] Speaker 00:
St.

[00:08:59] Speaker 00:
George's main campus was in Granada.

[00:09:01] Speaker 00:
Dr. Pearson completed his first year in England.

[00:09:05] Speaker 00:
the handbook, federal student aid handbook, is very clear about those foreign medical school programs.

[00:09:12] Speaker 03:
But Ms.

[00:09:12] Speaker 03:
Doling, aren't you really suggesting that if he was participating in a program even though he was an eligible student and even though it was an eligible institution, that program was specifically excluded by the regulations and so if all the programs don't satisfy the requirements, then the program itself should be disqualified, but that's not what the code requires, does it?

[00:09:36] Speaker 00:
Well, you cannot have Title IV funding if you're not in an eligible program.

[00:09:40] Speaker 00:
at an eligible institution and you're an eligible student.

[00:09:44] Speaker 00:
And I think that's the problem in this case is when you were looking at the string of statutes, they stopped on one of the statutes that said, oh, you're an eligible institution.

[00:09:56] Speaker 00:
And that disregards the entire rest of the statute and the reds that require program participation agreements to be eligible, to have that program be eligible, and not to make

[00:10:09] Speaker 00:
make light of the situation but if you went to UCLA and you went to their underwater basket weaving

[00:10:16] Speaker 00:
program and that was not a title for eligible program you couldn't just get title for funding for that program even though ucla is on federal student aid list or federal student school list so are you suggesting that if you went to ucla to go to get an undergraduate degree and one of your electives was basket weaving and that wouldn't qualify then ucla wouldn't be a qualified institution no that's not the argument your honor the problem with the

[00:10:45] Speaker 00:
program is not taking an elective that might not be Title IV eligible.

[00:10:49] Speaker 00:
It has to be.

[00:10:50] Speaker 00:
You have to be in a graduate program that is an eligible program.

[00:10:54] Speaker 00:
So meaning most of the criteria of that program meets the Title IV regulations.

[00:10:59] Speaker 03:
Well, with the exception of the one year that he took in Northumbria, which you take issue with, the rest of the program qualified, didn't it?

[00:11:06] Speaker 00:
Yes, but they are very, very clear, especially in the Department of Education letter that was sent to St.

[00:11:12] Speaker 00:
George's.

[00:11:13] Speaker 00:
stating if your students take this coursework outside of Granada, then they're not eligible for Title IV funding.

[00:11:20] Speaker 00:
That is plastered all over their website.

[00:11:22] Speaker 00:
That is plastered in the financial student aid handbook.

[00:11:28] Speaker 00:
They are very clear that you're not going to get funding in that.

[00:11:32] Speaker 03:
Do you want to reserve the rest of your time?

[00:11:35] Speaker 00:
Yes.

[00:11:36] Speaker 00:
Thank you, Your Honor.

[00:11:36] Speaker 00:
I've blocked my time.

[00:11:49] Speaker 02:
Good morning, Your Honors.

[00:11:49] Speaker 02:
I'll reserve two minutes for rebuttal.

[00:11:52] Speaker 02:
Good morning, and may it please the court.

[00:11:54] Speaker 02:
My name is Vanessa Hopper Bush, and I'm representing the appellees and cross-appellants, Rob and Cora Nichols.

[00:12:00] Speaker 02:
As my colleague has stated, this case is a simple one.

[00:12:03] Speaker 02:
The facts are not in dispute.

[00:12:05] Speaker 02:
My clients loaned money to the debtor to fund his medical education, and the debtor seeks to discharge that loan that he used to fund that education with a medical degree that he currently is using and enjoying today.

[00:12:17] Speaker 02:
The facts are not in dispute.

[00:12:19] Speaker 02:
The debtor agrees to that in the brief and today.

[00:12:23] Speaker 02:
Ultimately, the dispute is a legal one, whether the loan is non-dischargeable.

[00:12:27] Speaker 02:
While it's a unique issue of law, we believe that it is one of statutory interpretation that only has one of two conclusions.

[00:12:34] Speaker 02:
One, that the entire loan is non-dischargeable, as my clients assert, or two, affirm the decision of the bankruptcy court, which was that part of the loan was non-dischargeable.

[00:12:44] Speaker 02:
The analysis starts with Section 523A8B.

[00:12:49] Speaker 02:
Using that analysis, the court must go through the statutes using only those statutes referenced in each of the applicable, what I'll call tranches of interpretation as we set forth in our brief.

[00:13:00] Speaker 02:
What appellant does is use regulations and matters that are not specifically within that framework to try to merge and conflate programmatic eligibility with both institutional eligibility

[00:13:13] Speaker 02:
and a student's eligibility.

[00:13:16] Speaker 02:
First, I'll start to the institution's eligibility.

[00:13:20] Speaker 03:
Let me ask you a question.

[00:13:22] Speaker 03:
The 523A8B states that any other educational loan that is a qualified educational loan and then it references the code section of the IRC 221D1, correct?

[00:13:40] Speaker 03:
If the bankruptcy court made a factual finding that it was an educational loan for pre-medical and medical school education, you don't dispute that, correct?

[00:13:49] Speaker 03:
Correct.

[00:13:50] Speaker 03:
If the bankruptcy court made a factual finding that the pre-medical education at St.

[00:13:54] Speaker 03:
George's University, not the medical school, is not an eligible institution because St.

[00:14:00] Speaker 03:
George's University was not on the federal school list,

[00:14:04] Speaker 03:
Then if Nichols made a loan for a total of $331,500, correct?

[00:14:08] Speaker 03:
That's correct.

[00:14:11] Speaker 03:
To the debtor to pay for medical education, but part of the loan was used to pay for education and expenses at an ineligible institution, St.

[00:14:21] Speaker 03:
George's University.

[00:14:23] Speaker 03:
Then how does Nichols Loan satisfy the requirement of 523A8B

[00:14:28] Speaker 03:
that accepts from discharge any other educational loan that is a qualified educational loan as defined in Section 221D1.

[00:14:38] Speaker 02:
Yes, Your Honor.

[00:14:38] Speaker 02:
I'll address that in a couple of points.

[00:14:40] Speaker 02:
So first, when we look at Section 26 USC, Section 221D1, the language looks at whether the loan was incurred

[00:14:50] Speaker 02:
solely to pay higher, qualified higher educational expenses.

[00:14:54] Speaker 02:
There's no dispute by any parties or the bankruptcy court that the entirety of the loan was incurred for education and for the debtor's medical education.

[00:15:03] Speaker 03:
But there's a definition of what a qualified, medical, qualified loan is under that section, right?

[00:15:10] Speaker 03:
Correct.

[00:15:10] Speaker 03:
And it requires that the student be eligible and the institution be eligible.

[00:15:15] Speaker 02:
Correct.

[00:15:15] Speaker 02:
So if the factual finding is that part of the

[00:15:18] Speaker 02:
loan was used for a non-qualified higher educational expense for this argument, I'm assuming that it is.

[00:15:24] Speaker 02:
My argument is that it was not incurred for paying a non-qualified expense.

[00:15:29] Speaker 03:
How could it not be, since you're saying that the entire loan is all part of the educational loan?

[00:15:35] Speaker 02:
Sue, it has to do with why the loan is incurred, Your Honor, because you look at what the loan was incurred for.

[00:15:40] Speaker 02:
It's incurred solely for a purpose, which was for the debtor to obtain his medical degree, which he did.

[00:15:47] Speaker 02:
So because that's the purpose of the loan, that's the state's purpose, there's no other purpose, the entirety of the loan would be non-dischargeable.

[00:15:54] Speaker 03:
That merges two different concepts.

[00:15:57] Speaker 03:
One is that it's an educational loan and the stated purpose clearly

[00:16:01] Speaker 03:
is that it's for an educational loan.

[00:16:03] Speaker 03:
That's established by the state court.

[00:16:04] Speaker 03:
It's established, I think, by the bankruptcy court.

[00:16:07] Speaker 03:
But the second piece of it, that it is a qualified loan, is not defined by the stated purpose.

[00:16:13] Speaker 03:
That requires actual elements of each of the qualified loan subsections be met, doesn't it?

[00:16:19] Speaker 02:
Your Honor, I do not believe it does, because you have to look at the purpose of the loan.

[00:16:22] Speaker 02:
But even assuming that, Your Honor, it's correct and that it does matter, this is a series of loans

[00:16:28] Speaker 02:
It was an oral?

[00:16:29] Speaker 01:
Wait a second.

[00:16:30] Speaker 01:
You say a series of loans.

[00:16:32] Speaker 01:
I was curious about this.

[00:16:35] Speaker 01:
When I go through and read the record, there is a series of transfers, but the way your client pled this issue is that there is a loan and there is a stipulation

[00:16:52] Speaker 01:
and this has gone to trial and it was stipulated so we have a finding of fact here that there is a loan singular, not loans.

[00:17:00] Speaker 01:
It would be very different to me if this was pled differently and we had different findings of fact.

[00:17:06] Speaker 01:
We had a finding of fact is that there was X dollars used to pay for the undergraduate institution that may not have been qualified and there was Y dollars that was used to pay for the medical school education which everybody,

[00:17:22] Speaker 01:
by itself views that as qualified.

[00:17:25] Speaker 01:
If you had loans, maybe one loan would be dischargeable and the other one would not.

[00:17:32] Speaker 01:
But when you have only one loan, that the money went for two different purposes.

[00:17:39] Speaker 01:
It went for the purpose of paying for the undergraduate biology classes to be able to get into medical school and then it paid for medical expenses.

[00:17:49] Speaker 01:
It was one loan that had two purposes.

[00:17:52] Speaker 01:
And that's what I'm struggling with.

[00:17:55] Speaker 01:
We have two purposes, but then we have the language in the IRC that says solely for.

[00:18:02] Speaker 01:
It doesn't seem to me that there's a problem there.

[00:18:07] Speaker 02:
Understood, Your Honor.

[00:18:08] Speaker 02:
And again, that was going to my first point that I was addressing earlier in terms of why we believe it's incurred solely for a purpose, which it was incurred for the sole purpose of medical school education.

[00:18:18] Speaker 02:
But to the extent that Your Honors do not see it that way, again, this was an oral,

[00:18:22] Speaker 02:
It was not.

[00:18:23] Speaker 01:
OK, but you could have pled it differently.

[00:18:26] Speaker 01:
So we have, maybe it was 18 loans.

[00:18:30] Speaker 01:
We had a loan for tuition to the undergraduate institution, a loan for expenses related to the institution, maybe housing expenses.

[00:18:40] Speaker 01:
And then we had the fourth loan was for medical school tuition.

[00:18:45] Speaker 01:
and, you know, medical school housing, you know, and so you'd have a series of loans.

[00:18:51] Speaker 01:
We wouldn't have had this problem if it was pled differently.

[00:18:54] Speaker 02:
Understood, Your Honor.

[00:18:55] Speaker 02:
I will say that the reason it was pled the way it was is because, again, my client's intention, and I believe all of the party's intention, was this was incurred solely for one purpose, which was the medical school education.

[00:19:06] Speaker 02:
The fact that it was used for something else was not the intention of the parties.

[00:19:09] Speaker 02:
nor was that reading.

[00:19:11] Speaker 01:
But it was the intention of the parties to use it for the undergraduate expenses.

[00:19:16] Speaker 01:
They intended, didn't they, isn't the record clear that everybody knew that the doctor wasn't going to get into medical school right then, the doctor had to take some, I'm guessing biology type classes, you know, things that they didn't, that were sort of prerequisites to go to medical school.

[00:19:32] Speaker 01:
That was one of the purposes here is to get to buttress,

[00:19:37] Speaker 01:
his record so that he could get into medical school.

[00:19:41] Speaker 01:
So ultimately there was a purpose, but there was a purpose to get there.

[00:19:44] Speaker 01:
The purpose could have been met, that he could have gotten into medical school and decided he didn't like it like he didn't like the practice of law.

[00:19:53] Speaker 02:
Understood your honor, but I think if again the intention was for him to get the medical degree, so I mean that is our perspective I'm not sure if we can if I can say anything that will change your mind on what the facts I haven't I haven't I haven't made up my mind.

[00:20:07] Speaker 01:
I'm listening to you.

[00:20:08] Speaker 02:
Yeah, I'm not sure if I can add anything else I think the record is fairly clear on that.

[00:20:11] Speaker 02:
I do think that due to the nature of the loan Yes, we pled it as one loan But it is also a series of loans when he said he needed money for medical school, which is it's fairly vague and

[00:20:21] Speaker 02:
My clients would provide money for that in a series of transactions.

[00:20:25] Speaker 03:
But it's also pretty vague as to what and how the money was actually loaned, right?

[00:20:30] Speaker 03:
The only evidence you provided was the deposits from Mr. Nichols into the joint account with his daughter.

[00:20:36] Speaker 03:
You don't have any of the expenses that she actually, the transfers that she actually made out of that account into the joint account.

[00:20:44] Speaker 03:
You don't have any expenses that she made from the joint account to the university.

[00:20:48] Speaker 03:
or for any expenses.

[00:20:49] Speaker 03:
Then you just have the tuition statement.

[00:20:51] Speaker 03:
That's the totality of your evidence.

[00:20:54] Speaker 03:
So it's your contention, I think, if I understand, that a mixed-use loan, in this case, one to pay for the pre-med and one to pay for the, or continuously to get through the medical degree, but knowing that part of it was going to be used to pay the undergraduate expenses, is a single loan comprised of some

[00:21:12] Speaker 03:
funds used for qualified educational expenses, those that were at the eligible school, and part not, nevertheless, is accepted from discharge under 523A8 based on the stated purpose of the loan that it was for medical education.

[00:21:28] Speaker 03:
Isn't that your position?

[00:21:30] Speaker 02:
Your Honor, it's slightly more nuanced than that because our position is that it was incurred solely for the purpose of medical education, but yes, otherwise you are correct.

[00:21:37] Speaker 03:
And then if Nichols view is that the entire loan was for educational purposes, that's sufficient to make it non-dischargeable under 528, 523A8B, even though it doesn't address the second portion of that that says an educational loan that is a qualified loan.

[00:21:55] Speaker 02:
Your Honor, again, we believe that it is because St.

[00:21:57] Speaker 02:
George's is an eligible institution and the medical degree was obtained.

[00:22:00] Speaker 03:
But not the non-medical school is not a qualified institution.

[00:22:06] Speaker 02:
Understood, Your Honor.

[00:22:07] Speaker 02:
I do have one comment on the factual finding of the bankruptcy court, which we do dispute.

[00:22:10] Speaker 02:
I do know that's a higher standard.

[00:22:12] Speaker 02:
But we do not dispute that there was pre-medical school education.

[00:22:15] Speaker 02:
We do dispute whether that was paid to a qualified educational institution, St.

[00:22:20] Speaker 02:
George's.

[00:22:21] Speaker 02:
The tuition statement is one tuition statement.

[00:22:23] Speaker 02:
All of the payments were made to that same school.

[00:22:25] Speaker 02:
The debtor received all of his education from the same school.

[00:22:29] Speaker 02:
By that logic, the entirety is non-dischargeable as well.

[00:22:33] Speaker 02:
Again, that is a higher standard, but that is our position, Your Honor.

[00:22:35] Speaker 03:
I understand your position, but you would have needed to argue that in the brief and suggest that that factual finding was clearly erroneous and the court should reverse it, and I didn't see that argument being made in your brief.

[00:22:46] Speaker 02:
Understood, Your Honor.

[00:22:48] Speaker 03:
Okay.

[00:22:48] Speaker 03:
Thank you.

[00:22:49] Speaker 02:
Thank you, Your Honor.

[00:22:52] Speaker 02:
I will reserve the rest of my time.

[00:22:53] Speaker 03:
Thank you.

[00:23:06] Speaker 00:
Thank you.

[00:23:06] Speaker 00:
The argument that actual use and purpose were met, we would take the position and do contend

[00:23:18] Speaker 00:
even if actual use and purpose was medical school for the loans, that still does not defeat the solely requirement that Congress put out there.

[00:23:29] Speaker 00:
And this may be a harsh result on this one loan but that is what Congress set forth.

[00:23:34] Speaker 00:
And there's a reason why that is a harsh result because we don't want mixed use loans coming up.

[00:23:40] Speaker 00:
We don't want that to be an issue that comes up in Title IV lending.

[00:23:44] Speaker 01:
Would this issue not have come up

[00:23:47] Speaker 01:
if it was better documented and it was documented as a series of loans?

[00:23:53] Speaker 01:
Would your client have lost if that was the case is that there were findings that there were loans for the undergraduate institution and there were separate loans for the medical school?

[00:24:03] Speaker 00:
That may change the fact on this, but that didn't happen here, number one.

[00:24:09] Speaker 00:
Number two, even though there is a statement that lists all the money that went to St.

[00:24:14] Speaker 00:
George's, that's just a statement.

[00:24:17] Speaker 00:
call them up and say we want to see how the tuition was paid and they can print off a statement for you.

[00:24:22] Speaker 00:
That does not document that there were individual loans and they did treat this as one loan throughout this process.

[00:24:28] Speaker 03:
And your other argument is that the institution itself was not qualified because it offered a program that violated the terms of the letter that you received from the Department of Education that said if you do a year

[00:24:44] Speaker 03:
of your first medical school year outside of the Granada campus, then it won't qualify.

[00:24:52] Speaker 03:
But that really only establishes that you wouldn't be entitled to get student loans through the government.

[00:24:58] Speaker 03:
It doesn't establish that the campus is an eligible school, does it?

[00:25:04] Speaker 00:
Well, the campus itself is an eligible school.

[00:25:08] Speaker 00:
We don't dispute that.

[00:25:10] Speaker 00:
But even if there was a private lender, you know, as we had here,

[00:25:14] Speaker 00:
on it, that private loan is not going to rise to the level of non-dischargeability.

[00:25:20] Speaker 00:
You still have to meet the non-dischargeability requirements under 523A8B.

[00:25:26] Speaker 00:
Talking about the intended purpose, that issue was addressed in actually a Washington case and I believe it was in Ray Corbin and that was under an entirely different section of 523 and I think that distinction has to be made here because we are under

[00:25:44] Speaker 00:
A8B and not that other section.

[00:25:47] Speaker 00:
So you have to follow the statutory string to make sure that this loan was actually a non-dischargeable loan.

[00:25:58] Speaker 00:
With that, Your Honors,

[00:26:00] Speaker 00:
Even though this was a family situation and it obviously didn't end well, that is not something that we can take into consideration here.

[00:26:09] Speaker 00:
We have to follow the statute.

[00:26:10] Speaker 00:
We have to follow the law.

[00:26:12] Speaker 00:
And the facts are undisputed in this case.

[00:26:15] Speaker 00:
And at this point, we believe that this loan cannot be held to be a non-dischargeable loan.

[00:26:19] Speaker 00:
Non-dischargeability is a very harsh and unintended situation where we lean towards granting the debtors a fresh start and that's what we believe in this case should happen.

[00:26:36] Speaker 00:
Thank you.

[00:26:45] Speaker 02:
Judge Corbett, you asked if whether this loan was documented, it might make the results different and I believe that it may.

[00:26:52] Speaker 02:
The problem is we have an oral loan with very loose terms.

[00:26:56] Speaker 01:
I think my thought was somehow we had evidence that there were loans even if it was documented or it was clear or it was pled that there were loans but I'm troubled by the fact that we have.

[00:27:09] Speaker 01:
a pleading and a stipulation that all say we have loan singular and then we have the sole purpose language that deals with that.

[00:27:20] Speaker 01:
If we had two different loans, we could have two different purposes.

[00:27:23] Speaker 02:
Understood, Your Honor.

[00:27:23] Speaker 02:
And the bankruptcy court did take an approach where part of it was non-dischargeable and part of it was dischargeable although he didn't make the explicit finding on whether these were separate loans or not.

[00:27:32] Speaker 02:
The evidence is clear.

[00:27:33] Speaker 01:
But there is a specific finding that was stipulated to that there is one loan, right?

[00:27:38] Speaker 02:
That is correct, Your Honor, but there are also findings that there were a series of transfers of money from my clients to the debtor.

[00:27:45] Speaker 02:
So that can be seen in a number of different ways.

[00:27:48] Speaker 02:
Yes, you are correct that it is pled as one loan.

[00:27:51] Speaker 02:
And again, I would say the purpose of that loan is one purpose for his medical education.

[00:27:56] Speaker 02:
And because St.

[00:27:58] Speaker 02:
George's is an eligible institution and he got his medical degree there, all the statutes would allow for the entirety of the loan to be non-dischargeable.

[00:28:06] Speaker 02:
That is our position on that.

[00:28:07] Speaker 01:
I mean, maybe there's an old rule that's not, you know, I'm not citing to it but that parties document your loan transactions.

[00:28:18] Speaker 02:
Yes, I think that is a lesson for sure here, Your Honor, especially perhaps getting more information about the type of school and all of those things.

[00:28:25] Speaker 02:
Since this is a rather unusual school, I think if it had been a traditional school, this would not be an issue either because it is a foreign school.

[00:28:32] Speaker 02:
You get an interesting legal issue out of it.

[00:28:34] Speaker 02:
I will also comment that the purposes of non-dischargeability, while appellant is correct, they are to be viewed in favor of the debtor.

[00:28:42] Speaker 02:
You have educational loans non-dischargeable for a reason.

[00:28:45] Speaker 02:
It's because you would obtain a benefit from that loan, and if you can use that, it's material.

[00:28:52] Speaker 02:
You don't have a loan here where you have a piece of paper that says you're a medical doctor that you can't use in the United States.

[00:28:58] Speaker 02:
He has a medical degree so that he can practice as a doctor here.

[00:29:02] Speaker 02:
The purpose of non-dischargeability is for that.

[00:29:05] Speaker 02:
So you're not having a loan from, you know, Joe Smoe's medical school that's valueless, that costs you $200,000 so that the debtor can get a fresh start.

[00:29:14] Speaker 02:
These things are relevant and support the ruling that we are requesting of this court, that the entirety of the loan be non-dischargeable.

[00:29:21] Speaker 02:
or to affirm the ruling of the bankruptcy court.

[00:29:25] Speaker 02:
Thank you.

[00:29:28] Speaker 03:
We'll take this matter under advisement and we will issue a decision as soon as we can.

[00:29:34] Speaker 03:
Thank you both.

[00:29:36] Speaker 03:
Thank you.

[00:29:38] Speaker 03:
I'm going to call the next case.