THE ETHICAL DIMENSION At one point, United argued that if the Court failed to declare the bankruptcy court’s order void, it would encourage dishonest debtors to abuse the Chapter 13 process. How might such abuse occur? Discuss whether the possibility of such abuse should affect the Court’s decision.

Francisco Espinosa filed a petition for an individual repayment plan under Chapter 13 of the Bankruptcy Code. The plan proposed that Espinosa would repay only the principal of his student loan debt and that the interest on the loan would be discharged once the principal was repaid. Under Chapter 13, a student loan cannot be discharged unless the bankruptcy court finds that payment of the debt would constitute an undue hardship for the debtor. Despite this requirement, no undue hardship hearing was requested by Espinosa, by the court, or by United Student Aid Funds, Inc. (United), the creditor. United received notice of the plan but did not object to it. In addition, United failed to file an appeal after the bankruptcy court subsequently confirmed the plan. Years later, however, United filed a motion under Federal Rule of Civil Procedure 60(b)(4) asking the bankruptcy court to rule that its order confirming the plan was void because the order was issued in violation of the laws and rules governing bankruptcy. The court denied the petition and ordered United to cease its collection efforts. United appealed to the U.S. District Court for the District of Arizona, which reversed the bankruptcy court’s ruling. On further appeal, the U.S. Court of Appeals for the Ninth Circuit reversed the district court’s judgment. United appealed to the United States Supreme Court.