Just last month, the Bankruptcy Cave reported upon a Southern District of Texas case in which a debtor was denied discharge of a debt owed to an old (and likely former!?!) friend from church who had been required to pay off a student loan made to the debtor which the friend had guaranteed. Today we report another case involving friends and family and non-dischargeable student debt from the U.S.

Providing an exception to the axiom that no good deed goes unpunished, a Texas bankruptcy court recently declared nondischargeable a debt owed to a guarantor who had been forced to pay the debtor’s defaulted student loan.

The Second Circuit issued its much anticipated decision in Marblegate Asset Management LLC v. Education Management Corp., holding that “Section 316(b) prohibits only non-consensual amendments to an indenture’s core payment terms.” At issue is whether the phrase “right . . . to receive payment” forecloses “more than formal amendments to payment terms that eliminate the right to sue for payment.” The Second Circuit held that it does not.

Since Marblegate was decided in 2014, the only court to address claims under §316(b) of the Trust Indenture Act (“TIA”) in the context of a corporate restructuring transaction is

The Second Circuit Court of Appeals heard oral arguments in Marblegate Asset Management LLC v. Education Management Corp. on May 12, 2016. One might have thought from the courtroom’s overflow crowd that it was the opening argument in a mob trial, but this is a case about a bond indenture. At issue is whether an out-of-court debt restructuring that did not amend the indenture’s principal and interest terms, but that effectively precluded the noteholders’ ability to be repaid, violated § 316(b) of the Trust Indenture Act (TIA).