Bankruptcy: Court Has Power to Restructure Student Loan Obligation

Plaintiff was a Chapter 7 debtor who filed an adversary proceeding to obtain discharge of his student loan, or alternatively, to restructure the obligation. The bankruptcy court held that the debtor was not entitled to a total discharge, and that the court lacked sufficient equitable power to modify the debtor's student loan obligations. On appeal, the district court vacated the bankruptcy court's decision, holding that the bankruptcy court does have equitable power to fashion a remedy short of total discharge. The court remanded the case for further proceedings, because "the bankruptcy court has the obligation to exercise its discretion to choose whether partial discharge or a staggered repayment schedule are suitable remedies."

Devidts v The Education Resources Institute, Civ. No. 97-72797, E.D. Mich., 06/15/98, Cohn, J.