## Facts

- Twenty-one individuals filed voluntary bankruptcy petitions in the Western District of New York between October 1977 and October 1978.
- Each debtor owed or had guaranteed student loan obligations involving the New York State Higher Education Services Corporation (NYSHESC), with federal reinsurance arrangements under the Higher Education Act of 1965.
- Before November 6, 1978, 20 U.S.C. § 1087-3 limited discharge of covered student loans to (i) discharges granted after a five-year period from the start of repayment or (ii) earlier discharges upon a finding of “undue hardship.”
- On November 6, 1978, the Bankruptcy Reform Act of 1978 repealed § 1087-3, while a new student-loan nondischargeability provision, 11 U.S.C. § 523(a)(8), did not take effect until October 1, 1979.
- The bankruptcy court discharged the student loan obligations, reasoning that the repeal and delayed effective date created a period with no operative statute barring discharge; the district court affirmed.
- NYSHESC appealed, arguing the apparent gap was unintended and that Congress meant to maintain continuous restrictions on discharge of covered student loans.

## Issues

1. Whether the repeal of 20 U.S.C. § 1087-3 before the effective date of 11 U.S.C. § 523(a)(8) created an interim period in which covered student loans were freely dischargeable in bankruptcy.
2. Whether statutory interpretation, including legislative history and a savings clause in the Bankruptcy Reform Act, required treating the nondischargeability policy as continuous despite the apparent gap.

## Decision

- The Second Circuit reversed the district court and directed that the student loan debts not be discharged.
- The court held the repeal-to-effective-date interval did not reflect congressional intent to permit broad dischargeability of student loans.
- The court treated the gap as a legislative oversight and construed the statutory scheme to preserve the preexisting nondischargeability restrictions.
- The discharges of the student loan obligations were vacated; the loans were held nondischargeable.

## Legal Principles

- Courts may reject a literal reading of statutory timing provisions where it would produce results inconsistent with a clearly expressed and longstanding legislative policy and where the broader scheme indicates an unintended drafting or timing error.
- Legislative history and subsequent congressional explanations may be used to confirm that an apparent statutory lapse was inadvertent rather than a deliberate change in substantive rights.
- A statutory savings clause preserving rights in cases filed under prior law can support continuity of substantive restrictions during a transition between repealed and replacement provisions.
- Statutes should be construed to avoid interpretations that yield absurd or nonsensical outcomes when a more coherent reading better fits the evident purpose of the enactment.

## Conclusion

The Second Circuit held that Congress did not intend the repeal of the prior student-loan nondischargeability statute, coupled with a delayed effective date for the replacement provision, to create a temporary window for discharging covered student loans; instead, the court construed the transition provisions to maintain continuous nondischargeability absent the statutory exceptions.


In re Adamo, 619 F.2d 216 (2d Cir. 1980)