This case determined that a debt collector’s inaccurate representation to a debtor that her student loans were “ineligible” for bankruptcy discharge was a false, misleading, or deceptive debt collection practice, in violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.


In 1987, Plaintiff Berlincia Easterling obtained a student loan guaranteed by the United States Department of Education. On August 23, 2001, with the assistance of counsel, Easterling filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code. At that time, her student loan balance amounted to $2,469. In her bankruptcy petition, Easterling classified her student loan debt as “not dischargeable” and she did not seek to discharge her student loan debt during the course of her bankruptcy proceeding.

Student loans are presumptively non-dischargeable in bankruptcy. However, student loans can be discharged in bankruptcy if a debtor demonstrates that requiring their repayment “would impose an undue hardship on the debtor.”  To seek an undue hardship discharge of student loans, a debtor must “commence an adversary proceeding by serving a summons and complaint on affected creditors and show:

(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans;

(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(3) that the debtor has made good faith efforts to repay the loans.

Defendant Collecto is a debt collector which has a contract with the U.S. Department of Education to collect overdue student loans. When attempting to collect overdue student loans, if Collecto learns that a student loan debtor has filed for bankruptcy, it suspends collection activity and assigns the overdue account to an administrative resolution department to determine whether the student loan debt was discharged in bankruptcy. If the student loan debt was discharged in bankruptcy, Collecto sends the account back to the Department of Education because the debts cannot be collected. However, if Collecto finds that the bankrupt student loan debtor did not initiate an undue hardship adversary proceeding to discharge the debt, it recommences collection efforts by mailing a letter to the debtor with the following pertinent language:


Your account is NOT eligible for bankruptcy discharge and must be resolved.

The FDCPA establishes certain rights for consumers whose debts are placed in the hands of professional debt collectors for collection. In particular, section 1692e of the FDCPA provides that a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.  Whether a collection letter is false, deceptive, or misleading is determined from the perspective of the objective least sophisticated consumer. Under this standard, collection notices can be deceptive if they are open to more than one reasonable interpretation, at least one of which is inaccurate.

Since Easterling could have obtained, and may still obtain, a discharge of her student-loan indebtedness (a) by filing a new bankruptcy petition and seeking a discharge of her student loans in the new proceeding; or (b) by moving to reopen her prior bankruptcy cases for the purpose of filing a proceeding seeking a discharge of her student loans the court agreed that it is technically possible that her student loan debt could be discharged in bankruptcy and therefore the Collection Letter violated the FDCPA.

The least sophisticated consumer test is an objective inquiry directed toward ensuring that the FDCPA protects all consumers, the gullible as well as the shrewd.  By its very nature, the least sophisticated consumer test pays no attention to the circumstances of the particular debtor in question. Instead, the operative inquiry in this case is whether the hypothetical least sophisticated consumer could reasonably interpret the Collection Letter’s statement that “Your account is NOT eligible for bankruptcy discharge,” as representing, incorrectly, that the debtor is completely foreclosed from seeking bankruptcy discharge of the debt in question. When looked at in this manner, it clear that the Collection Letter is false, deceptive, or misleading in violation of the FDCPA.