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In re Carrion

United States Bankruptcy Appellate Panel of the Ninth Circuit

May 31, 2019

In re: CARLOS CARRION, JR., Debtor.
v.
CARLOS CARRION, JR., Appellee. U.S. DEPARTMENT OF EDUCATION, Appellant, Adv. Pro. 17-90089-MM

          Submitted without argument on May 23, 2019

          Appeal from the United States Bankruptcy Court for the Southern District of California Honorable Margaret M. Mann, Bankruptcy Judge, Presiding

         Appearances:

          Adam L. Braverman, Robert S. Brewer, Jr., and Glen F. Dorgan on the brief for appellant U.S. Department of Education; Jake A. Walton on the brief for appellee Carlos Carrion, Jr.

          Before: FARIS, BRAND, and KURTZ, Bankruptcy Judges.

          OPINION

          FARIS, BANKRUPTCY JUDGE

         INTRODUCTION

         Chapter 7[1] debtor Carlos Carrion, Jr. wanted to eliminate his obligation to repay an educational loan. He did not contend that the loan was dischargeable under § 523(a)(8). Instead, he argued that the loan was unenforceable against him, contending that he was a victim of fraud and identity theft and did not authorize the loan. The bankruptcy court rejected these contentions, and Mr. Carrion did not appeal. But the court also held that Mr. Carrion is liable for only one-half of the educational loan, based on California Family Code ("CFC") section 916 and a marital settlement agreement ("MSA") with his ex-wife. The educational loan creditor, U.S. Department of Education (the "Department"), appeals this aspect of the bankruptcy court's decision. It argues that the bankruptcy court misapplied CFC section 916 and that the entire debt should be nondischargeable as to Mr. Carrion.

         We agree with the Department. Accordingly, we REVERSE and REMAND.

         FACTUAL BACKGROUND[2]

         A. The educational loan

         Mr. Carrion was married to Laura Barajas. In 2010, Mr. Carrion's and Ms. Barajas' son Mikel intended to enroll at Biola University. To fund his education, Mr. Carrion and Ms. Barajas considered various financing options.

         In August 2010, the Department received an application for a Federal Direct PLUS Loan purportedly on behalf of Mr. Carrion and containing Mr. Carrion's typed, electronic signature. The application also served as a promissory note. The Department processed the loan and disbursed $21, 894 to Biola University to cover Mikel's tuition costs.

         Mr. Carrion and Ms. Barajas separated in February 2011. Ms. Barajas filed a petition for dissolution of marriage in June 2011.

         B. The joint chapter 7 bankruptcy

         Also in June 2011, Mr. Carrion and Ms. Barajas filed a joint chapter 7 bankruptcy petition. They scheduled the $21, 894 educational loan debt owed to the Department and indicated that the debt belonged to Mr. Carrion by designating it with an "H" (for "husband"). Both Mr. Carrion and Ms. Barajas electronically signed the petition and schedules under penalty of perjury. The bankruptcy court granted Mr. Carrion and Ms. Barajas their discharges in September 2011.

         C. The marital settlement agreement

         In 2013, Mr. Carrion and Ms. Barajas finalized their divorce and executed the MSA. The MSA listed their liabilities in Exhibit D to the agreement and provided that "[t]he parties' obligations have been divided equally between the parties pursuant to their agreement." It further stated that "[w]ith the exception of the parties' son's student loan, each party shall assume the debt incurred in his or her name after the date of separation as their sole and separate property." They initialed Exhibit D, which confirmed that they would each be liable for "1/2" of the "Student Loan (Son)."

         D. Mr. Carrion's claim of identity theft

         The educational loan became due in January 2016, when the deferment period ended. The Department sent Mr. Carrion a billing statement indicating a $32, 124.42 balance. Mr. Carrion denied that he owed the debt and filed a police report, claiming that he was a victim of identity theft and fraud. He also filled out an affidavit stating that Ms. Barajas perpetrated the fraud and ...


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