Hey, want to never pay those student loans again?

Sometimes it's better to be lucky than good, as the saying (for some reason) goes, and ECMC, as a student loan lender/collector is certainly more the former than the latter, as demonstrated by In Re Tyler, 285 B.R. 635 (Bk. W.D. TX, 2002) and the case cited therein.

Another lesson from this case might be "lawyers will stop at nothing to not pay their student loan debts," which is perhaps a discussion for another day, but this case begins with a pro se debtor filing a chapter 13 bankruptcy petition in which he listed student loans owed to ECMC, and provided for those loans in the plan.  ECMC filed a proof of claim but did that untimely, and so wasn't paid during the plan.

When the time came for the discharge, the bankruptcy trustee used an outdated form which didn't include language excepting student loans from discharge -- student loans are dischargeable only through an adversary proceeding and only then if the debtor proves a pretty substantial case for hardship. 

ECMC then began collecting the loan (or attempting to) by calling Tyler and intercepting his tax refund, so Tyler brought a motion to enforce the discharge, arguing that the plain language of the order prohibited ECMC from collecting.

In response, ECMC asked that the court allow it to collect, in part by moving to reopen under Rule 60, at which point Tyler did one of those jerk moves that lawyers so often do and which drive me nuts; he argued that ECMC had to file its own motion seeking relief from judgment, instead of simply asking for that in response.

Where does that come from?  Motions need to be written, unless made orally in court, is the general rule, so ECMC could have simply moved the Court to grant Rule 60 relief when it appeared for the hearing and that would presumably have sufficed.  One of the reasons I dislike lawyers so much is that they use stupid, annoying tactics like "you have to make your own motion," relying on flimsy procedural excuses as defenses.

Don't get me wrong: I'm all for procedural defenses.  I've moved to dismiss many a case for defective service and the like.  But a procedural excuse isn't the same thing as a procedural defense, and mucking up litigation with dumb ideas like "you have to file your own motion" is pointless and makes the lawyer look especially idiotic.  When I run into lawyers making arguments like that, I know one of two things: (A) This is not a very good lawyer, and (B) this lawyer is charging his/her client by the hour and needs to keep billable hours up.

I once had a lawyer try to "remand" a case of mine to small claims court, arguing that we could not be seeking more than $5,000 in damages and that therefore filing it as a civil action was wrong and it had to be a small claims suit.  What was particularly pointless about that argument was that it actually gained nothing; had the court dismissed, we were well within the statute of limitations, and I could have simply refiled it (for less!) and served it (by mail!) and then had not one, but two (!) hearings, because in small claims you can have a case heard by a court commissioner and if you don't like the results you can de novo review it and get a new trial for no reason whatsoever.  And you can still use the full panoply of discovery, and you can ask for more than $5,000 in damages, anyway. 

True, a small claims court can't award more than $5,000 in damages, but at the end of the two trials, I could appeal on a relatively narrow legal issue, and maybe get a remand for a third trial.

So like I said: Not very good, and billing by the hour.  (If I had my way, if I could be in charge of law for a day, I would prohibit minimum billable hour requirements for employment.  That would do away with a  lot of what's bad about the practice of law.)

Back to Tyler!  The bankruptcy judge didn't buy into Tyler's "he's got to file a new motion" whining, and said that the issues were the same on Tyler's motion and the hypothetical motion to reopen that Tyler wanted them to file, and that Tyler as a lawyer knew about the issues, so the judge considered whether the court order prohibited ECMC from collecting, and whether he should therefore modify the order, and came up with yes on both.

The order on its face, for somewhat technical reasons involving the word notwithstanding, which is a word I can't stand, notwithstanding that I use it anyway, the judge ruled, prohibited ECMC from collecting.  That's how it read, that's what it meant (even though the judge who entered the order couldn't have issued it had anyone bothered to read the order.)

But under Rule 60, the court decided, the order was void for that same reason: The judge could not have issued it. 

That's kind of a peculiar outcome, especially reading the case.  The court discussed a prior ECMC case that came to the same result: order void because it couldn't, technically, be issued, as the bankruptcy court cannot discharge a student loan except under limited circumstances.  And the court discussed the procedural requirements for such circumstances: a debtor must file an adversary summons and complaint, to give the student loan lender "notice and an opportunity to be heard" about the discharge (a consideration that elevated, at least temporarily, the procedural right to a summons and complaint in adversary proceeding to a substantive right to receive those procedures), and then talked about how the form was computer-generated, which is an odd thing to say even in 2002, as all forms are computer-generated in a sense, especially now.

The net result being this: the court took a rule (void orders are those that cannot be issued because the court lacks jurisdiction) and took a bunch of problems that don't add up to jurisdiction (computer-generated, outdated forms, a lender sleeping on its rights, a too-tricksy lawyer/debtor) and just lumped them all together.

There's no reason that had to be the outcome -- and no reason a Texas court had to decide that jurisdiction (which the court indubitably had, as it has the power to issue chapter 13 discharges and had personal jurisdiction over the parties) now includes statutory rights, such as the statutory right to avoid a discharge of student loans absent adversary proceedings.  In Wisconsin, courts deal with issues like this via the (made-up) rule of competency: failure to follow a statutory procedure can mean that a court which would otherwise have jurisdiction could still not act.

Or, the Court could have told ECMC, which had now twice in two different cases let a discharge order slide by without bothering to try to correct it -- and then had simply ignored the plain language of the court order until called on it -- that it was out of luck and it was, say, estopped from going after the debts.

On a side note: ECMC did, of course, violate the plain language of a court order which was in full force and effect when it took the prohibited actions, and the Court did find the order prohibited collecting, so is ECMC in contempt of court or violating the FDCPA or similar anti-harassment laws?  Probably not: the court's decision that the judgment was void meant it never had any effect, and a court can retroactively annul a stay, so it might be able to do the same with a discharge.  But at the very least, ECMC probably had a bona fide error defense available to any such claims.