Courts Split on Arbitrating Dischargeability of Student Loans

Unless the circuit courts are unanimous, the Supreme Court ultimately will decide whether individual debtors can be forced to arbitrate the dischargeability of student loans. Indeed, if the courts say that dischargeability of student loans must be arbitrated, it won’t be long before dischargeability disputes involving loans of all types are taken out of the bankruptcy courts and decided by arbitrators. And if dischargeability must arbitrated, why can’t arbitrators also rule on the allowance of claims? Bankruptcy Judge Jeffrey J. Graham of Indianapolis has most recently written on a subject where the lower courts are divided. He declined to follow Williams v. Navient Solutions LLC (In re Williams), 564 B.R. 770 (Bankr. S.D. Fla. 2017), where Bankruptcy Judge Erik P. Kimball of West Palm Beach, Fla., required the debtor the arbitrate the dischargeability of a student loan under Section 523(a)(8). Instead, Judge Graham decided in his November 16 opinion to follow Bankruptcy Judge Elizabeth S. Stong of Brooklyn, N.Y., who refused to enforce an arbitration agreement when the debtor mounted an adversary proceeding to discharge student loans. Golden v. JP Morgan Chase Bank NA (In re Golden), 587 B.R. 414 (Bankr. E.D.N.Y. 2018).

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