Recent Case Development: Around The Country
Tenth Circuit's Andersen decision does not permit Chapter 13 debtor counsel to intentionally include student loan discharge language in plans, and attorneys who persist in such practices are subject to sanctions.
In a strongly worded opinion, Chief Judge John TeSelle of the Bankruptcy Court for the Western District of Oklahoma has condemned the practice of some Chapter 13 debtor counsel of including language discharging the debtor's student loan debts in the hopes of "catching student loan creditors unaware." The issue springs from the Tenth Circuit's recent decision in Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), in which an appellate panel affirmed a decision that a simple student loan discharge provision contained within a Chapter 13 confirmed plan under which the debtor had made all payments was res judicata as to the discharge of the debtor's student loans notwithstanding the fact that the debtor had failed to file the required adversary proceeding. Chief Judge TeSelle stated that Andersen was not an invitation for Chapter 13 counsel to intentionally insert student loan discharge language, and, indeed, the Court stated that counsel who do so are engaging in unethical and sanctionable conduct. "Counsel appearing before this Court are officers of the Court and are ethically obligated to inform the Court if they are aware of the existence of a plan provision that renders the plan non-confirmable." Here, the Court permitted counsel to amend filed Chapter 13 plans before imposing sanctions, but is clear that attorneys who in the future file such plans will accept considerable risk that their actions will result in sanctions. In re Hensley, 249 B.R. 318 (Bankr. W.D. Okla. May 12, 2000).