U.S. Supreme Court Agrees to Hear Arizona Bankruptcy Case

September 14, 2009 By Gust Rosenfeld In Legal Alerts

Three Gust Rosenfeld attorneys convince high court to take case

Editor’s note: As the nation’s final arbiter of legal disputes, the United States Supreme Court is petitioned by a vast number of litigants, but a very small number of cases are selected for review by the court. For example, in 2008, the highest court in the land received more than10,000 petitions from parties seeking review of their cases-yet heard only about 100 cases. Merely presenting before the court is an honor and privilege as well as a challenging opportunity for attorneys.

The United States Supreme Court has agreed to hear an Arizona case about the discharge of student loans in bankruptcy. Three Gust Rosenfeld attorneys petitioned the high court to take the case after the Ninth Circuit Court of Appeals ruled that a debtor’s student loans could be forgiven in bankruptcy without showing “undue hardship” as Congress requires in the bankruptcy statutes. The case is United Student Aid Funds v. Espinosa, No. 08-1134.

Madeleine Wanslee, a creditors’ rights and bankruptcy attorney at Gust Rosenfeld, has been fighting this issue on behalf of a student loan guarantor in the Ninth Circuit and various lower courts for more than six years. Sean O’Brien, a bankruptcy attorney, and Charles Wirken, an appellate lawyer, assisted Wanslee in preparing the petition that persuaded the U.S. Supreme Court to hear the case.

“We are pleased that the U.S. Supreme Court has agreed to resolve this issue,” Wanslee said. “The Ninth Circuit’s decision is contrary to rulings in five other circuits. The court’s ruling allows debtors to discharge student loans in a Chapter 13 Bankruptcy without proving ‘undue hardship.’ Doing so represents a substantial loss of rights for student loan holders.”

Wanslee argues that the lower court’s ruling fails to comply with bankruptcy law. If the Ninth Circuit’s decision is upheld, she says it could adversely affect all student loan holders as well as other creditors typically afforded special treatment under bankruptcy law.

“If allowed to stand, this ruling could have wideranging implications that could result in the discharge of other special types of debt such as child support payments, drunk-driving damages, criminal penalties, and tax fraud fines,” Wanslee said. “In addition, this ruling negatively impacts the public in general because discharged student loans are ultimately paid by all of us as taxpayers.”

With more than 18 years of experience, Wanslee focuses her practice on creditors’ rights and related state and federal court litigation, including commercial and consumer bankruptcy, foreclosure, replevin, deficiency and guarantor actions, collections, and loan workouts. She has handled more than 24 appeals on behalf of her clients. In addition, she is Board Certified in Consumer Bankruptcy Law by the American Board of Certification.

If you have questions about this case or other Arizona bankruptcy law issues, please contact one of the attorneys below.

Séan P. O’Brien ~ 602-257-7460 ~ sobrien@gustlaw.com
Séan focuses his practice on bankruptcy, restructuring, creditors’ rights, and related litigation and appeals.

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