The First Circuit Court of Appeals affirmed a decision of the Massachusetts Bankruptcy Court on March 29, 2013 in the case of Hann v. Educational Credit Management Corporation. The debtor in that case, Barbara Hann, listed her student loans in the amount of "0", asserting that she had paid the loans in full prior to filing her Chapter 13 case. Educational Management Credit Management Corporation (ECMC) filed a proof of claim in the case asserting the debtor owed it $54,756.44. Hann objected to the claim, and the Court held an evidentiary hearing at which the debtor testified and submitted an affidavit demonstrating that she had paid the student loans in full. ECMC did not appear or participate at the hearing. The Bankruptcy Court sustained Hann's objection and allowed ECMC's claim in the amount of "0". After the conclusion of the bankruptcy case, ECMC resumed collection activity.
Hann reopened her bankruptcy case and filed an adversary proceeding against ECMC for a violation of the discharge injunction. The Bankruptcy Court ruled for Hann, and Bankruptcy Appellate Panel affirmed, as did the First Circuit. ECMC argued in the First Circuit that the Bankruptcy Court never adjudicated the amount outstanding on the student loans, but the First Circuit disagreed. The First Circuit held that this was not an issue of the dischargeability of the student loans. Instead, the case was whether the Bankruptcy Court actually determined the amount owed on the claim. Since the Bankruptcy Court conducted a fact finding hearing at which it found no debt currently owing ECMC, the First Circuit concluded that ECMC had violated the discharge injunction by trying to collect a debt that no longer existed.
At the hearing, Hann produced documents from the student lender and a private bank lender which showed conflicting information on the status of the student loans. Hann's affidavit provided additional proof of Hann's payments on the loans, showing her making payments in excess of the amounts owed on the loans. This proof was critical to the Court in determining that no further debt remained on the loans.