Post-Filing Modification Prevents Student Loans from Being Discharged in Bankruptcy

Naffis v. Xerox Education Services, LLC


AP No. 15-0078


February 6, 2019


The consumer sought to discharge student loans, but after filing the bankruptcy, the consumer consolidated his loans, which made them a “post-petition” debt and, therefore not dischargeable. The consumer then Amended his Complaint to add violations of the Fair Debt Collection Practices Act (“FDCPA”) and the Maryland Consumer Debt Collection Act (“MCDCA”) because the servicer persuaded him to consolidate his loans, causing him to lose the opportunity for discharge. The servicer, Xerox Education Services, LLC (“XES”) filed a motion for summary judgment.

The Court held that because the student loans were not in default at the time, XES became the servicer, the FDCPA does not apply to them in this case. Thus, the FDCPA states that “the term debt collector does not include any person collecting or attempting to collect any debt owed or due or asserted to be owed or due to another to the extent such activity concerns a debt which was not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F)(iii).


The basis for XES’s request for summary judgment is that the consumer is not entitled to the damages he is requesting as a matter of law.  The Court disagreed noting that the consumer is seeking damages in the amount equal to the original loan under the theory that the Debtor would have been able to discharge those loans under the “hardship discharge” provision in his underlying bankruptcy case.  The Court recognized the difficulty facing the consumer to prove that he would have been able to discharge the student loans to prove causation, but this is a viable damages theory, and that the cause of action may move forward on those grounds.


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