Good Faith and the Discharge of Educational Loans in Chapter 13: Forging a Judicial Consensus

In the Bankruptcy Reform Act of 19781 Congress sought to accomplish many goals, some of which appear internally incompatible. For example, Congress enacted section 523(a)(8) to limit the dischargeability of educational loans in Chapter 7 liquidations. At the same time, however, Congress enacted the new Chapter 13 to encourage consumer debtors--including student borrowers--to elect repayment plans whenever feasible. Chapter 13 contains a superdischarge provision, which offers debtors a much broader discharge than the discharge that is available under section 523(a) in straight bankruptcy. While section 523(a)(8) excepts educational loans from discharge, section 1328(a) of Chapter 13 does not except them from discharge.This Article examines the tension that seems to exist between these two Bankruptcy Code provisions. Part II discusses the nature of federal educational loan programs. Part III reviews the legislative history of section 523(a)(8) to evaluate Congress\u27 intent and purpose. Part III then inspects the history and operation of section 1328(a), Chapter 13\u27s super discharge provision, to see whether the two sections are reconcilable. Part IV analyzes recent decisions that attempt to reconcile these two code provisions through the good faith requirement of section 1325(a). Part V considers the appropriateness of excepting educational loans from discharge in bankruptcy. Part V concludes that a court asked to confirm a re-payment plan that will result in the discharge of educational loans best serves Congress\u27 purposes by analyzing the totality of circumstances when making an inquiry into the good faith of a pro-posed plan. Finally, part V discusses the way recent congressional legislation implements the totality of circumstances test