
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                                 ____________________        No. 95-1702                              T I FEDERAL CREDIT UNION,                                 Plaintiff, Appellee,                                          v.                                 JOHN CARL DELBONIS,                                Defendant, Appellant.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Reginald C. Lindsay, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                Torruella, Chief Judge,                                           ___________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Stahl, Circuit Judge.                                         _____________                                 ____________________            Theodore J. Koban for appellant.            _________________            Paul  F.  Lorincz, with  whom  Coogan,  Smith,  Bennett,  McGahan,            _________________              ___________________________________        Lorincz & Jacobi were on brief for appellee.        ________________                                 ____________________                                  December 18, 1995                                 ____________________                      BOWNES,  Senior  Circuit  Judge.   This  appeal  by                      BOWNES,  Senior  Circuit  Judge.                               ______________________            defendant-appellant  John Carl DelBonis,  a chapter 7 debtor,            concerns the  dischargeability of educational  loans under 11            U.S.C.   523 (a)(8).  The District Court for the  District of            Massachusetts  reversed  a  bankruptcy  court  order granting            DelBonis  summary  judgment.     Debtor's  appeal  from  that            decision  asks  us to  do  two things:  reverse  the district            court's  holding  that federal  credit  unions  are nonprofit            organizations and  hold that educational loans  issued to him            by creditor-appellee TI Federal Credit Union are,  therefore,            dischargeable in bankruptcy.  We deny both requests.                        Instead,  we affirm  the  result  achieved  by  the            district court -- that debtor's loans are nondischargeable --            and  elect not to reach  the issue of  federal credit unions'            nonprofit status.  Because our conclusion that federal credit            unions  qualify as government units  within the meaning of 11            U.S.C.    523(a)(8)  provides  a sufficient  legal basis  for            upholding the district court's order, we reserve the issue of            whether such organizations qualify as nonprofit organizations            within  the   meaning  of  that  statute   for  another  day.            Jurisdiction of this appeal stems from 28 U.S.C.   158(d).                    I.     THE FACTS                    I.     THE FACTS                      Financial  difficulties caused  defendant-appellant            John Carl DelBonis ("DelBonis")  to file for bankruptcy under            Chapter  7  of the  Bankruptcy  Code on  September  20, 1993.                                         -2-                                          2            DelBonis's  Chapter  7 application,  which  he  filed in  the            Eastern  District  of  Massachusetts,  listed,   inter  alia,                                                             _____  ____            educational  loans he  obtained  on behalf  of  his wife  and            children  as debts to be  discharged.  The  loans, from which            DelBonis obtained no direct personal  benefit and on which he            is the sole obligor, were acquired from the  Texas Instrument            Federal Credit  Union, ("TIFCU") while DelBonis  was employed            at Texas Instruments, Inc.   DelBonis's employment with Texas            Instruments,  Inc.,  one  of  nine  institutional members  of            TIFCU, terminated in November, 1992.                      Chartered on  May 9, 1960, pursuant  to the Federal            Credit  Union Act,  12  U.S.C.    1751  et seq.,  TIFCU is  a                                                    __ ___            federal credit union and has its principal place of  business            in  Attleboro,  Massachusetts.    Like  most  federal  credit            unions,  TIFCU provides  a  variety of  credit, savings,  and            financial  counseling  services to  its  members.   Loans  --            educational; home equity; residential real estate; and member            business  -- however,  represent TIFCU's  primary investment.            Cf.   National   Credit  Union   Administration,   Office  of            __            Examination and  Insurance, Federal Credit Union  Handbook 11                                        _______ ______ _____  ________            (1988).   Because TIFCU is  a federal credit  union, its loan            activities are heavily regulated by the National Credit Union            Administration ("NCUA").  See generally 12 C.F.R. Ch. VII (1-                                      ___ _________            1-95 Edition).   NCUA exists  within the executive  branch of            the  federal  government  and  was  established  in  1970  to                                         -3-                                          3            "prescrib[e] rules and  regulations for the organization  and            operation of federal credit unions  . . . ."   Federal Credit                                                           _______ ______            Union Handbook, supra, at 2.            _____ ________  _____                      DelBonis  took  out his  first  educational expense            loan  with TIFCU  on  December  27,  1985,  for  the  sum  of            $3,500.00.  TIFCU  advanced the  loans as part  of a  special            educational  loan  program.    The  program,  which  was  not            federally guaranteed, had  several attractive  features.   It            made  loans  at low  interest  rates,  gave borrowers  longer            repayment  periods, and  allowed  loans to  be aggregated  in            maximum amounts greater  than those permitted  under personal            loan programs.                        One  of  the  most appealing  features  of  TIFCU's            educational  loan program  was that  it enabled  borrowers to            simultaneously   borrow   additional   funds  and   refinance            outstanding  balances  on  previous  loans.    DelBonis  took            advantage of this feature on  numerous occasions.  Under  the            requirements  of the  loan  program, the  proceeds from  each            transaction were paid directly to the educational institution            DelBonis specified.                       During  the period  spanning December  27, 1985  to            January 4,  1991, DelBonis turned to TIFCU  sixteen times for            assistance in  meeting his family's educational  needs.  Each            time TIFCU responded by granting him the funds  he requested.            In  fact,  TIFCU advanced  a  total  of  $43,114.87  in  loan                                         -4-                                          4            proceeds on DelBonis's behalf.  DelBonis ultimately asked and            was  permitted  to  consolidate  these loans  into  a  single            promissory note for $39,064.46,  payable over ten years, with            interest  at  9.6%  per  annum.    A  principal  balance   of            $32,618.27 is currently due on that amount.              II.     THE PROCEEDINGS BELOW              II.     THE PROCEEDINGS BELOW                      On  December 3,  1993, nine  months after  DelBonis            filed for Chapter 7 bankruptcy and, thereby,  sought to avoid            repayment  of his  loan  debt, TIFCU  initiated a  bankruptcy            court adversary proceeding.  TIFCU requested a  determination            as  to whether 11 U.S.C.   523(a)(8) rendered the educational            loans  issued  to  DelBonis nondischargeable  in  bankruptcy.            TIFCU  argued that  its  status  as  a nonprofit  required  a            finding of nondischargeability under the statute.                      Six months  after the adversary  proceedings began,            the  parties submitted  an Agreed  Statement of  Fact  to the            bankruptcy  court.    That  document  included  the erroneous            stipulation that "TIFCU  is not a governmental unit  . . . ."            Agreed  Statement of Fact at 2.   DelBonis filed a motion for            _________________________            summary judgment  on June  6, 1994, almost  immediately after            the Agreed  Statement of Fact  was filed with  the bankruptcy            court.  His summary judgment motion raised two issues bearing            on  11 U.S.C.   523  (a)(8)'s applicability in  this case: 1)            whether  TIFCU is  a  nonprofit institution;  and 2)  whether                                         -5-                                          5            debtor's  loans  became  due  within  the  seven-year  period            prescribed by 11 U.S.C.   523(a)(8).                        The  bankruptcy court  granted summary  judgment on            the first issue and, based on its analysis, did not reach the            second  issue.    The  bankruptcy  court  found  that  "loans            incurred  to educate members of a  debtor's family qualify as            educational  loans   within  the  meaning  of   11  U.S.C.               523(a)(8)."   In re DelBonis, 169 B.R.  1, 2 (Bankr. D. Mass.                          ______________            1994).  It ruled, however, that federal credit unions are not            nonprofit   organizations   entitled  to   Section  523(a)(8)            protection because they are comprised  of member-shareholders            and are authorized to  issue dividends to such members.   Id.                                                                      ___            The bankruptcy  court found  that nonprofit  organizations do            not  possess  such  characteristics.     Id.  at  3-4.    The                                                     ___            bankruptcy  court  acknowledged that  TIFCU's  suit  raised a            novel issue  of law and, therefore,  denied debtor's requests            for fees and costs.  Id. at 4.                                   ___                      TIFCU appealed  the bankruptcy court's  decision on            June  28, 1994  and  filed  a  Motion  to  Amend  the  Agreed            Statement  of  Fact   on  the  ground  that  it   included  a            stipulation  erroneously denying  TIFCU's legal  status as  a            government unit.  The  bankruptcy court denied TIFCU's Motion            to Amend  on July 11,  1994.  TIFCU subsequently  filed a new            Notice  of Appeal  challenging  both the  bankruptcy  court's                                         -6-                                          6            summary  judgment order and denial of the Motion to Amend the            Agreed Statement of Fact.                      On   appeal,  the   district  court   reversed  the            bankruptcy court's  grant of summary judgment.   It held that            federal  credit  unions  qualify  as  nonprofit organizations            under  Section  523(a)(8)  and   issued  a  detailed  opinion            outlining the legal and  policy-based justifications for such            a  classification.   Id. at  5.   Our decision  in  La Caisse                                 ___                            _________            Populaire Ste. Marie v. United States, 563 F.2d 505 (1st Cir.            _____________________________________            1977),  defining   a  credit  union   as  "a   democratically            controlled, cooperative, nonprofit society organized  for the            purpose  of encouraging  thrift and  self-reliance  among its            members .  . .  ,"  was cited  as  support for  the  district            court's reversal.   Id. at  4-5 (quoting La  Caisse Populaire                                ___          _______ ____________________            Ste.  Marie v.  United States,  563 F.2d  505, 509  (1st Cir.            _____________________________            1977).   La Caisse held that state credit unions are entitled                     _________            to general  income tax exemption  under Section 501(c)(14)(A)            of the Internal Revenue Code.  Because the ground on which it            based  its decision  independently warranted  a  finding that            debtor's  loans  are  nondischargeable,  the  district  court            deemed  it unnecessary  to "reach  the question  whether [the            bankruptcy court judge]  should have allowed the  appellant's            motion to amend its agreed statement of facts regarding . . .            [TIFCU's] status as a federal instrumentality."  Id. at 5.                                                             ___            III.      THE STATUTE            III.      THE STATUTE                                         -7-                                          7                      Resolution   of   this  case,   as   the  following            discussion  reveals,  requires us  to  consider  a gaggle  of            statutes and statutory issues.  Questions about the status of            federal credit unions implicate the Federal Credit Union Act,            12 U.S.C.    1751 et  seq., bankruptcy law,  and the  federal                              __  ___            income  tax  code.    See  26  U.S.C.    501.    Because  the                                  ___            possibilities for  confusion run high, we  think it important            to clearly set out  the terms of 11  U.S.C.   523(a)(8),  the            statute on the basis  of which TIFCU initiated the  adversary            proceeding.    In  relevant  part,  11 U.S.C.     523  (a)(8)            provides:                      (a) A discharge  under section 727, 1141,                      1228(a), 1228(b) or 1328(b) of this title                      does not discharge  an individual  debtor                      from any debt --                       (8)    for    an   educational    benefit                      overpayment  or  loan  made,  insured  or                      guaranteed by a government unit,  or made                      under  any program funded  in whole or in                      part by a  governmental unit or nonprofit                      institution,  or  for  an  obligation  to                      repay  funds  received as  an educational                      benefit,scholarship or stipend, unless --                      (A) such loan,  benefit, scholarship,  or                      stipend overpayment first became due more                      than 7 years (exclusive of any applicable                      suspension   of  the   repayment  period)                      before  the date  of  the filing  of  the                      petition; or (B) excepting such debt from                      discharge   under  this   paragraph  will                      impose an un-due  hardship on the  debtor                      and the debtor's dependents.                      In   summary,   Section   523(a)(8)    offers   two            alternatives for  adjudicating educational loans issued  by a            federal credit union  nondischargeable.   First, it  provides                                         -8-                                          8            that   educational  loans   or   benefit   overpayments   are            nondischargeable,  if issued in whole or in part by an agency            qualifying as a nonprofit  organization.  Second, the statute            also  makes   loans  issued,   insured,   or  guaranteed   by            governmental units nondischargeable.  A debtor's loans, thus,            are nondischargeable  if they  fall within the  parameters of            either provision.                        Congress delineates  only  two exceptions  to  this            nondischargeability  policy.     A  demonstration   that  the            educational loan,  benefit, scholarship, or  stipend at issue            in the case first became due more than seven years before the            filing of the  bankruptcy petition excepts a  debtor from the            statute.    Finally, evidence  that  nondischargeability will            impose  an undue  hardship on  debtor or  debtor's dependents            provides a basis for circumventing  nondischargeability.  The            hardship alleged, however, must  be undue and attributable to            truly  exceptional  circumstances,  such  as  illness  or the            existence  of an unusually large number of dependents.  In re                                                                    _____            Lohman, 79 B.R. 576, 581 (Bankr. D. Vt. 1987).              ______                      Thus far, this case has primarily traveled down the            analytical path  carved out by Section  523(a)(8)'s nonprofit            organization   provision.     In  the   adversary  proceeding            conducted  before  the  bankruptcy  court,  TIFCU's principal            argument for nondischargeability of DelBonis's loans was that            it qualified  as a nonprofit organization  within the meaning                                         -9-                                          9            of  11 U.S.C.   523  (a)(8).  Similarly,  both the bankruptcy            court and the district  court, albeit with different results,            focused  solely   on  whether  federal   credit  unions   are            nonprofits.                      A reasonable  basis for assuming such an analytical            tack  exists, to be sure.   Numerous other  courts have fixed            their nondischargeability analyses on questions pertaining to            the, oftentimes, fine distinctions between nonprofit and for-            profit entities.  Unfortunately, a reading of their decisions            suggests that no clear consensus on  these questions has been            reached.    See In re Roberts, 149 B.R.  547 (Bankr. C.D.Ill.                        ___ _____________            1993)  ("[I]t  is not  disputed that  the  Credit Union  is a            nonprofit institution.");  TI Federal Credit Union,  183 B.R.                                       _______________________            at 1; Compare with In re Sinclair-Ganos, 133 B.R. 382 (Bankr.                  _______ ____ ____________________            W.D.  Mich. 1991) ("[T]his court holds that a credit union is            not  a  nonprofit institution  under  11  U.S.C. section  523            (a)(8)); and  In  re Simmons,  175 B.R.  624 (Bankr.  E.D.Va.                     ___  ______________            1994) ("[T]he  credit  union in  the  case at  bar  is not  a            nonprofit  institution   within  the  scope  of  section  523            (a)(8)").     Disagreements   over  whether   courts   should            concentrate   on   an  organization's   articulated  purpose,            specific  financial activities, or competitiveness with other            for-profit   institutions   in   making    nonprofit   status            determinations abound.  Compare  TI Federal Credit Union, 183                                    _______  _______________________            B.R. at 1  with In re DelBonis, 169 B.R. 1 and In re Roberts,                       ____ ______________             ___ _____________                                         -10-                                          10            149  B.R.  at   547.    Consequently,   no  clear  test   for            "determining  when a nonprofit institution is -- or is not --            a  nonprofit  institution under  section  523  (a)(8) of  the            Bankruptcy  Code" has  been formulated.   In re  Roberts, 149                                                      ______________            B.R. at  551; see also 18  Am. Jur. 2d, Corporations    32 at                          ___ ____            827  ("The words  'profit'  or 'nonprofit'  have no  definite            meaning or general application . . . .").                      In light of this discord, we are satisfied that the            district court's  focus on whether federal  credit unions are            nonprofits  was misplaced.    Sound judicial  policy counsels            against  deciding  complicated legal  issues  where a  clear,            principled, alternative  basis for  reaching the same  result            exists.   Cf.  Walmac Co. v.  Issacs, 220 F.2d  108, 113 (1st                      __   _____________________            Cir. 1955).  TIFCU's appeal  of the bankruptcy court's denial            of its Motion to Amend the Agreed Statement of Fact  gave the            district court an  opportunity to decide  this case under  11            U.S.C.     523  (a)(8)'s  government unit  provision.    That            provision  provides us  with a principled,  alternative basis            for affirming the district court's nondischargeability order.                      Unlike the nonprofit provision, the government unit            prong  of  the  Section  523(a)(8)  is  unambiguous  and  not            particularly difficult  to interpret.   In re  Pelkowski, 990                                                    ________________            F.2d  737, 741-42 (3rd Cir.  1993).  And  the law establishes                                         -11-                                          11            that  federal  credit unions  perform  important governmental            purposes and operate as federal instrumentalities.                IV.      DISCUSSION             IV.      DISCUSSION                      Before addressing the substantive issues underlying            our  conclusion  that  federal credit  unions  are government            units  within  the  meaning  of Section  523(a)(8),  we  must            confront  the  threshold issue  of  whether  the question  of            TIFCU's  status as a  government unit is  properly before us.            We,  therefore,  begin  our  discussion  by   evaluating  the            procedural propriety of our deciding this case on that basis.            The  substantive issues underlying our judgment that debtor's            loans are nondischargeable will be discussed thereafter.                      A.   Stipulations                      A.   Stipulations                      In  our  judicial  system,  "[s]tipulations  fairly            entered into  are favored."   Burstein v. United  States, 232                                          __________________________            F.2d  19, 23 (8th Cir.  1956).  Factual  stipulations tend to            "expedite a trial and eliminate the necessity of much tedious            proof."  Id.  As a result, "parties to a lawsuit  are free to                     __            stipulate to  factual matters."   Saviano v.  Commissioner of                                              ___________________________            Internal  Revenue, 765 F.2d 643,  645 (7th Cir.  1985).  They            _________________            are, however, not generally free to extricate themselves from            those stipulations  once crafted.    Due to  the interest  in            preserving  the  efficiency  attained  through  stipulations,            "[t]he general rule . . . [is] that stipulations of attorneys            made during  a trial may not  be disregarded or set  aside at                                         -12-                                          12            will . . . ."  Marshall  v. Emersons Ltd., 593 F.2d 565,  569                           __________________________            (4th Cir. 1979) (citing Maryland Cas. Co. v. Rickenbaker, 146                                    ________________________________            F.2d 751,  753 (4th  Cir. 1944));  see also  73 Am.  Jur. 2d,                                               ___ ____            Stipulation   1 (1974).                        Litigation  stipulations can  be understood  as the            analogue  of  terms binding  parties to  a  contract.   As in            contract  law  though,  rules  limiting  litigants  to  trial            stipulations  are not absolute.   Marshall, 593  F.2d at 569.                                              ________            Case law is clear  that "a stipulation of counsel  originally            designed to expedite the trial should  not be rigidly adhered            to  when it becomes apparent  that it may  inflict a manifest            injustice  upon one of the contracting parties."  Id. at 568.                                                              __            Parties will usually be  relieved of their stipulations where            it becomes evident that "the agreement was made under a clear            mistake."  Brast v.  Winding Gulf Colliery Co., 94  F.2d 179,                       ___________________________________            180 (4th Cir. 1938).                      Relief  from  erroneous stipulations  is especially            favored where  the mistake made concerns  a legal conclusion.            Saviano,  765 F.2d at 645.   "[P]arties may  not stipulate to            _______            the legal conclusions to be reached by the  court."  Id.; see                                                                 ___  ___            also Swift  & Co. v.  Hocking Valley Ry.  Co., 243 U.S.  281,            ____ ________________________________________            289-90  (1917); O'Connor  v. City and  County of  Denver, 894                            ________________________________________            F.2d 1210,  1225-26 (10th  Cir. 1990)(citing Platt  v. United                                                         ________________            States, 163 F.2d  165, 168  (10th Cir. 1947));  C.C. Gunn  v.            ______                                          _____________            United  States,  283 F.2d  358, 364  (8th  Cir. 1960);  In re            ______________                                          _____                                         -13-                                          13            Dawson,  162 B.R. 329, 334 (Bankr.  D. Kan. 1993).  Issues of            ______            law are  the province of courts, not of parties to a lawsuit,            individuals whose  legal conclusions may be  tainted by self-            interest.   Courts, accordingly, "are not bound  to accept as            controlling, stipulations as to questions of law."  Estate of                                                                _________            Sanford  v.  Commissioner, 308  U.S.  39,  51 (1939);  accord            _________________________                              ______            Dedham  Water Co., Inc. v.  Cumberland Farms Dairy, Inc., 972            ________________________________________________________            F.2d  453, 457 (1st  Cir. 1992) (citing  RCI Northeast Servs.                                                     ____________________            Div. v. Boston Edison Co., 822 F.2d 199, 203 (1st Cir. 1987);            _________________________            In  re Scheinberg,  132 B.R.  443, 444,  aff'd, 134  B.R. 426            _________________                        _____            (Bankr. D. Kan. 1992).                      We  review  this  appeal  de novo  because  we  are                                                __ ____            persuaded  that  TIFCU's erroneous  stipulation  that federal            credit unions are not government  units concerned a matter of            law,  not of  fact.   See  Compagnie  De Reassurance  v.  New                                  ___  __________________________________            England  Reinsur.,  57 F.3d  56,  71 (1st  Cir.  1995), cert.            _________________                                       _____            denied,  --  S.Ct.  --,  64  U.S.L.W.  3250 (Dec.  4,  1995).            ______            Appellate courts  review bankruptcy  court  findings of  fact            under  the clearly  erroneous  standard,  but  subject  legal            conclusion  drawn  by such  courts to  de  novo review.   See                                                   __  ____           ___            Western  Auto Supply Co. v.  Savage Arms, Inc.  (In re Savage            ______________________________________________   ____________            Indus., Inc.), 43 F.3d  714, 719-20, n.8 (1st Cir.  1994); In            ____________                                               __            re Comer, 723 F.2d 737, 739 (9th Cir. 1984);  see also Inwood            ________                                      ___ ____ ______            Lab., Inc.  v. Ives  Lab.,  Inc., 456  U.S.  844, 855  n.  15            _______________________________            (1982)(citing United States v. Singer Mfg. Co., 374 U.S. 174,                          ___________________________                                         -14-                                          14            194 n. 9 (1963));  accord Cumpiano v. Banco  Santander Puerto                               ______ ___________________________________            Rico, 902 F.2d 148, 153 (1st Cir. 1990).  Whether    Congress            ____            meant to include federal credit  unions within the meaning of            the term "government unit"  has not previously been addressed            by  this court,  but  is, otherwise,  a garden-variety  legal            question, one courts are regularly called upon to answer.  It            primarily  requires us  to consider  not facts,  but  law and            various  legal  authorities --  i.e., federal  statutes; case            law;  and legislative  history.   To the  extent, if  at all,            factual considerations enter our analytical picture, it  will            be only to  help us reach the proper legal  conclusion on the            question now  before us.  TIFCU's  erroneous stipulation does            not bind this appeal.                        No  injustice flows  from our  decision to  relieve            TIFCU  from the  burden  of its  erroneous stipulation.   See                                                                      ___            Marshall, 593 F.2d at 568.  Debtor's position, admittedly, is            ________            not aided by our decision  to set TIFCU's stipulation  aside.            We  think it fairly obvious  though, that a  far greater harm            would be  effectuated by allowing that  stipulation to stand.            Important federal  bankruptcy and loan policies  are at stake            in this litigation, not  merely DelBonis's personal financial            difficulties, however unfortunate and burdensome they may be.            It  was error  for the  bankruptcy court  to refuse  to allow            TIFCU to amend the Agreed Statement of Facts.               B.       Appeals and Lower Court Error             B.       Appeals and Lower Court Error                                         -15-                                          15                      Having concluded that the issue  of whether federal            credit unions qualify  as government units under 11  U.S.C.              523 (a)(8)  remains an open issue,  we move on to  consider a            second,  but not  unrelated, procedural  question:   Does the            district court's decision not to evaluate TIFCU's appeal from            the  bankruptcy court's  denial  of its  Motion to  Amend the            Agreed  Statement of  Fact preclude  us from  addressing that            issue?   The answer to this question is an unqualified no.  A            district court's failure to decide an issue raised by a party            and adequately supported by the facts contained in the record            does not move that issue beyond an appellate court's purview.            Estate of Soler v. Rodriguez, 63 F.3d 45, 53  (1st Cir. 1995)            ____________________________            (citing Willhauck  v. Halpin,  953  F.2d 689,  704 (1st  Cir.                    ____________________            1991).                      In  this  circuit,  "[a]n  appellate court  is  not            limited  to the  legal grounds  relied upon  by  the district            court,  but  may  affirm  on  any  independently   sufficient            grounds."   Id.; see  also Polyplastics, Inc.  v. Transconex,                        __   ___  ____ __________________________________            Inc.,  827  F.2d  859, 861  (1st  Cir.  1987); Casagrande  v.            ____                                           ______________            Agonitsas,  748 F.2d 47, 48 n. 1 (1st Cir. 1984)(per curiam).            _________            While   it  is   axiomatic   that,   except  in   exceptional            circumstances, parties may not surprise appellate courts with            new issues, we do  not find ourselves faced with  a situation            in  which  a party  has conjured  up  an issue  for appellate            review without first presenting  it to the trial court.   See                                                                      ___                                         -16-                                          16            Johnston  v. Holiday Inns, 595 F.2d 890, 894 (1st Cir. 1979);            _________________________            see also Teamsters, Chauffers, Warehousemen & Helper's Union,            ___ ____ ____________________________________________________            Local No. 59  v. Superline Transp. Co., 953 F.2d  17, 21 (1st            _____________________________________            Cir. 1992); McCoy  v. Massachusetts Institute  of Technology,                        ________________________________________________            950  F.2d  13 (1st  Cir. 1991),  cert.  denied, 504  U.S. 910                                             _____________            (1992) ("It is hornbook law that theories not raised squarely            in the district court  cannot be surfaced for the  first time            on appeal.").   TIFCU  raised the  issue of  its status as  a            government  instrumentality on two  separate occasions.   Its            effort  to  amend  the  Agreed  Statement of  Facts  and  to,            thereby,  correct the erroneous legal conclusion that federal            credit  unions are  not  government units,  coupled with  its            appeal  of  the bankruptcy  court's  denial  of that  motion,            preserved the issue for our review.                      TIFCU  has  fulfilled  its obligation  to  squarely            raise those issues  most pertinent to  the resolution of  its            entire case.   See id.   We think  it worth noting,  however,                           ___ ___            that we would  be able to reach the  issue of whether federal            credit unions are governmental  units even if TIFCU  had done            nothing.   Contrary to what debtor might have us believe, the            rule that binds parties to their arguments is not inflexible.            Johnston,  595 F.2d  at  894.   "[A]ppellate court[s]  ha[ve]            ________            discretion, in  . .  . exceptional  case[s], to  reach virgin            issues."   United States v.  La Guardia, 902  F.2d 1010, 1013                       ____________________________            (1st Cir.  1990); United States v.  Mercedes-Amparo, 980 F.2d                              _________________________________                                         -17-                                          17            17, 18-19 (1st Cir.  1992); ; accord Singleton v.  Wulff, 428                                          ______ ___________________            U.S. 106,  121 (1976); G.D. v.  Westmoreland School District,                                   _______  _____________________________            930  F.2d  942,   950  (1st  Cir.  1991)   (holding  that  in            exceptional  circumstances appellate courts may review issues            of  law inadequately  raised  at trial);    United States  v.                                                        _________________            Krynicki, 689 F.2d 289, 291-92 (1st Cir. 1989).              ________                      Our  recent  decision,  National  Ass'n  of  Social                                              ___________________________            Workers  v. Harwood,  No. 95-1090,  slip op.  at 9  (1st Cir.            ___________________            November  13, 1995),  stands for  the proposition  that cases            involving important constitutional or governmental issues may            be exceptional and, as such, there should be a full treatment            of all legal issues  involved, whether squarely introduced by            the  parties  or  not.     See  Baybank-Middlesex  v.  Raylar                                       ___  _____________________________            Distributors,  Inc., No.  95-1623, slip  op. at  5 (1st  Cir.            ___________________            November 7, 1995); cf.  Lebron v. Nat'l R.R. Passenger Corp.,                               ___  ____________________________________            115 S. Ct.  961, 965 (1995) (permitting  a party to  raise an            issue  it expressly disavowed  and did not  raise until after            certiorari  was  granted)("parties  .  . .  [will]  not  [be]            limited to the precise arguments they made below").  National                                                                 ________            Ass'n of  Social Workers  addressed the  constitutionality of            ________________________            Rhode  Island  House  of  Representatives  Rule  45,  banning            "lobbyist  and lobbying from the floor of the House while the            House is in session . . . ."   Id. at 2.  The district  court                                           ___            held  that Rule  45 violated  the free  speech clause  of the            First  Amendment.   We reversed  the district  court, holding                                         -18-                                          18            that legislative immunity thwarted the constitutional attack,            even  though that  issue had  not  previously been  raised by            either  of the parties.   We departed from  the rule limiting            parties to their lower  court arguments because we recognized            the  issue presented  by  the case  as  important, "of  great            public moment."  Id. at 11.   It implicated matters "as basic                             ___            as "federalism,  comity, and respect for  the independence of            democratic institutions."  Id.  National   Ass'n  of   Social                                       ___  _____________________________            Workers makes  us doubly certain of  the procedural propriety            _______            of deciding this case.   The present case fits  squarely into            the mold cast  by National  Ass'n of Social  Workers and  the                              __________________________________            cases we have deemed  "exceptional" in the past.   See United                                                               ___ ______            States  v. La Guardia, 902  F.2d 1010, 1013  (1st Cir. 1990);            _____________________            United States  v. Krynicki,  689 F.2d  289, 291-92  (1st Cir.            __________________________            1982).   We are convinced that a miscarriage of justice would            be  worked by a failure to address the governmental status of            federal credit  unions because the  governmental issues  that            question  implicates  are   so  important.     The  continued            viability of  educational loan programs and  the stability of            federal  credit  unions impact  the  health  of the  national            economy  and  the  country's   educational  system.    As  we            indicated  in  the previous  section, whether  federal credit            unions qualify as government units under Section 523(a)(8) is            "strictly a question of law" and can be resolved on the basis            of the  existing record.  La  Guardia, 902 F.2d at  1013.  It                                      ___________                                         -19-                                          19            requires no additional  factfinding or further argument;  the            parties are  not prejudiced in any way by the lack of another            opportunity to reargue their case.                        We   think  it  likely  that  questions  about  the            government  unit  status  of   federal  credit  unions   will            resurface in  future cases,  in virtually  "identical terms."            Id.   The dischargeability  of loans under  Section 523(a)(8)            ___            continues  to be a heavily  litigated area.   Finally, we are            convinced that  the result achieved by the district court was            correct.   And "[i]n the review of judicial proceedings . . .            [it]  is settled that, if  the decision below  is correct, it            must  be affirmed,  although the  lower court  relied upon  a            wrong  ground or gave a  wrong reason."   Helvering v. Gowan,                                                      __________________            302 U.S. 238, 245 (1937).     We  can identify  no legitimate            reason to decline to  chart the alternative course we  see in            this case.   Additionally, we are  certain that remanding  at            this point in the case would be  a colossal waste of judicial            resources.  See Securities and Exchange Commission v. Chenery                        ___ _____________________________________________            Corporation, 318 U.S. 80, 88 (1943).  Nothing would be gained            ___________            by  asking the district court to reinstate its holding and to            tackle a legal  question which falls well  within our current            power  to  formulate.    Id.    Accordingly,  we  proceed.                                        ___            C.        Are      Federal     Credit      Unions     Federal            C.        Are      Federal     Credit      Unions     Federal            Instrumentalities?             Instrumentalities?                                         -20-                                          20                      The  term  "government  unit,"  as employed  in  11            U.S.C.                523 (a)(8),  means:  "United States;  State; Commonwealth;            District; Territory; municipality; foreign state; department,            agency,  or instrumentality  of the  United States,  . .  . a            State,   a  Commonwealth,   a   District,   a  Territory,   a            municipality,  or  a  foreign  state;  or  other  foreign  or            domestic government."  11 U.S.C.   101.   Legislative history            suggests  that Congress  intended  to "'defin[e]  'government            unit'  in  the broadest  sense."   H.  Rep. No.  95-595, 95th            Cong., 1st  Session (1977),  reprinted in App.  2 Collier  on                                         _________ __         ___________            Bankruptcy, pt. II, at  311 (Lawrence P. King, ed.,  15th ed.            __________            1995).  We think it evident, based on this, that  11 U.S.C.              101   encompasses   federal   credit   unions    as   federal            instrumentalities,  but  refrain  from making  a  categorical            holding to  that effect  at this  juncture.  The  legislative            history  indicates   that  Congress  meant   to  temper   its            exhortation to define broadly.  According to that history, we            must demonstrate  that federal  credit unions have  an active            relationship with the federal government, that they carry out            some  governmental function.  Id.   "'[I]nstrumentality' does                                          ___            not include entities that owe their existence to State action            such as the granting of a charter or a license, but that have            no other connection with  a State or local government  or the            Federal Government.  Id.                                  ___                                         -21-                                          21                      Whether   federal   credit   unions   are   federal            instrumentalities,  thus, depends on  the types  of functions            such  organizations perform.    We are  aware  of no  settled            process   for  assessing  the  governmental  character  of  a            particular  function or  service.   In  the  area of  federal            instrumentality  decisions,  we  lack the  advantage  of  any            bright line rules or  tests.  Federal Reserve Bank  of Boston                                          _______________________________            v.  Comm'r of Corporations and Taxation, 499 F.2d 60, 64 (1st            _______________________________________            Cir. 1974); see also  United States v. Michigan, 851  F.2d at                        ___ ____  _________________________            806 (citing Dep't  of Employment v.  United States, 385  U.S.                 ______ ____________________ _________________            355,  358-59   (1966)  ("[T]here   is  no  simple   test  for            ascertaining whether an institution  is so closely related to            government    activity    as   to    become    a   tax-immune            instrumentality").   As a result,  we rest our  decision on a            combination  of  statutory   interpretation,  case  law,  and            consideration    of   the   factors   relevant   to   federal            instrumentality determinations.                       Perhaps the most "significant factor in determining            whether a  particular entity is a  federal instrumentality is            whether  it  performs  an  important   government  function."            United  States v. Michigan, 851 F.2d 803, 806 (6th Cir. 188);            __________________________            see also Federal Land  Bank v. Bismarck Lumber Co.,  314 U.S.            ___ ____ _________________________________________            95 (1941).  In response  to devastating Depression era losses            --  failed  banks;  high  interest  rates;  diminished credit            opportunities   --   Congress  created   scores   of  federal                                         -22-                                          22            organizations  and corporations  designed  to  stabilize  the            national  economy and  pursue other  governmental ends.   See                                                                      ___            generally Lebron, 115 S. Ct. at 969-71 (detailing the history            _________ ______            of federal  corporations in the United  States and explaining            that  even the  denial of  federal instrumentality  status in            enabling   legislation   is   not  dispositive   in   federal            instrumentality  determinations);   see  also  Reconstruction                                                ___  ____  ______________            Finance Corporation,  306 U.S.  at 391, n.3  (listing federal            ___________________            credit  unions among  a list  of forty  corporations Congress            provided to  discharge governmental  functions).  As  part of            this  rehabilitative  effort,  the  Congress  created federal            credit unions  by enacting the  Federal Credit Union  Act, 12            U.S.C. 1751 et seq., in 1934.                          __ ___                      The  express purpose  of the  Federal Credit  Union            Act, articulated  in its long  title, was: "[T]o  establish a            Federal Credit  Unions System, to establish  a further market            for  securities  of  the  United  States  and  to  make  more            available  to  people of  small  means  credit for  provident            purposes  through a  national system  of  cooperative credit,            thereby  helping to  stabilize  the credit  structure of  the            United  States."  12 U.S.C.   1751, reprinted in Credit Union                                                _________ __            National   Association,  Inc.,  Legislative  History  of  the                                            _____________________________            Federal  Credit   Union  Act:  A  Study   of  the  Historical            _____________________________________________________________            Development  From  1934  to  1980 of  the  Statute  Governing            _____________________________________________________________            Federal Credit Unions;" see also Branch Bank & Trust v. Nat'l            _____________________   ___ ____ ____________________________                                         -23-                                          23            Credit  Union  Admin. Bd.,  786  F.2d 621,  625-26  (4th Cir.            ________________________            1986),  cert. denied, 479 U.S.  1063 (1987).   In effect, the                    ____________            Federal Credit Union Act  created a localized and liberalized            system of federal credit services.  It modeled that system on            the strong network  of state and local  credit unions already            established at the time.  That network started functioning in            the  early  twentieth century,  with  the  occurrence of  two            important events,  the founding  of the first  United States-            based credit  union, La  Caisse Populaire,  in  1908 and  the            enactment of  the first comprehensive  credit union  statute,            the  Massachusetts Credit Union Act, Mass. Gen. L. ch. 171,              1 et  seq., in 1909.   See La  Caisse Populaire, 563  F.2d at              __  ___              ___ ____________________            505;   J.  Moody  and G.  Fite,  The Credit  Union  Movement:                                             ____________________________            Origins and Development 1850 to 1980 19-31 (2d ed. 1984).            ____________________________________                      This  history  demonstrates  that   federal  credit            unions  were intended  to perform  a variety  of governmental            functions.   Our  research  establishes that  they still  do.            Federal credit  unions enable the federal  government to make            credit  available  to  millions of  working  class Americans.            These   organizations,   often   described  as   "cooperative            association[s] organized .  . . for the  purpose of promoting            thrift among [their] members and creating a source of  credit            for  provident  or productive  purposes,  12  U.S.C.    1752,            provide credit at reasonable rates to millions of individuals            who -- because they lack security or, as recent studies show,                                         -24-                                          24            reside  in  low  income  areas or  in  communities  primarily            inhabited by  racial minorities -- would  otherwise be unable            to acquire  it. Cf. United States  v. Michigan, 851 F.  2d at                            __  __________________________            806; see also Federal Credit Union Handbook, at iii;  Anthony                 ___ ____ _____________________________            D.   Taibi,   Banking,   Finance,   and   Community  Economic                          _______________________________________________            Empowerment:  Structure,  Economic  Theory, Procedural  Civil            _____________________________________________________________            Rights,  and Substantive  Racial Justice,  107 Harv.  L. Rev.            ________________________________________            1463  (1994)  (describing  impact  of  redlining  and  credit            discrimination  on  local  communities  ).     Because  large            financial  entities  generally  refuse  to  extend  credit to            individuals   without   traditionally   accepted   forms   of            collateral, entities offering usurious interest rates are too            often the only other viable source of credit for many working            class  people. See  Branch  Bank &  Trust,  786 F.2d  at  621                           ___  _____________________            (outlining formation of credit unions in response to entities            offering usurious rates).                      Nevertheless,  the  functions performed  by federal            credit unions are not  limited to broadening the availability            of   credit in the United States.   Federal credit unions are            authorized to perform many  other governmental functions.  To            begin, the Federal Credit Union  Act authorizes them to issue            loans and dividends to their members.   12 U.S.C.   1757; see                                                                      ___            also 12 U.S.C.    1763.   It also  authorizes federal  credit            ____            unions to  invest their funds  in obligations  of the  United            States; invest  in securities;  or make deposits  in national                                         -25-                                          25            banks.   Id.  Indeed,  federal credit unions  serve as fiscal                     ___            agents  of  the United  States  and  depositories for  public            monies.   United States v. Maine,  524 F. Supp. at  1059; see                      ______________________                          ___            also  United  States  v.  Michigan,  635  F.  Supp  944,  947            ____  ____________________________            (W.D.Mich. 1985),  aff'd, 851  F.2d 803  (6th Cir.  1988); 12                               _____            U.S.C.   1767(a) ("Each  Federal credit union organized under            this chapter  . . . shall  act as fiscal agent  of the United            States .  . . [and] [a]ny Federal credit union . . . shall be            a depository of public money . . . .").                      Such  functions  have  properly  been  regarded  as            important governmental  functions by other courts.   In Smith                                                                    _____            v. Kansas  City Title &  Trust Co., 255 U.S.  180 (1921), the            __________________________________            United States Supreme Court acknowledged that employment as a            fiscal agent of the United States and service as a depository            for  public monies  fulfilled important  government purposes.            255 U.S. at  209-11.   Smith exempted farm  loans from  state                                   _____            taxation because  of the governmental  functions federal land            banks  performed and, concomitantly, held that Congress acted            within  its constitutional  authority  when  it  enacted  the            Federal Farm Loan Act, 39  Stat. 360, as amended by Jan.  18,            1918,  40 Stat. 431.   The Farm Loan  Act established federal            land banks and joint-stock land banks.  Id.                                                    ___                      In  the two decades  following the  Smith decision,                                                          _____            the Court held that federal land banks operated as government            instrumentalities on three  separate occasions.   See Federal                                                              ___ _______                                         -26-                                          26            Land  Bank of Columbia S.C.  v. Gaines, 290  U.S. 247 (1933);            ______________________________________            Federal  Land Bank  of  St. Louis  v.  Briddy, 295  U.S.  229            _____________________________________________            (1935);  and Federal Land Bank of St. Paul v. Bismarck Lumber                         ________________________________________________            Co., 314 U.S. 95 (1941).  In Federal Land Bank of St. Paul v.            ___                          ________________________________            Bismarck Lumber Co., 314 U.S.  95 (1941), the Court explained            __________________            the reasons  for this conclusion and  emphasized that federal            land banks  performed the  important governmental  purpose of            extending credit,  at low interest rates,  to farm borrowers.            314 U.S.  at 100.  Federal credit unions indisputably provide            a similar service and  reach, by definition, a  much "broader            cross-section of  the nation's  citizens."  United  States v.                                                        _________________            Michigan, 851 F.2d at 806.               ________                      More recently, in 1988, the  Sixth Circuit embraced            the  Supreme  Court's  conclusions  about   the  governmental            importance of extending credit, functioning as a fiscal agent            of the United  States, and extending  credit at low  interest            rates.  In United States v. Michigan,  851 F.2d 803 (6th Cir.                       _________________________            1988), the Sixth Circuit found that federal credit unions are            government instrumentalities precisely  because they  perform            such functions.   851 F.2d  at 806-07.   The court  explained            that,  "[b]ecause  of  the important  governmental  functions            performed  by federal  credit  unions, .  .  . we  hold  that            federal credit unions are federal instrumentalities."  Id. at                                                                   ___            807.   The  court then  went on  to  hold that  the Supremacy            Clause and 12  U.S.C.   1768  immunize federal credit  unions                                         -27-                                          27            from state taxation.   Id.; see also United States  v. Maine,                                   ___  ___ ____ _______________________            524 F.  Supp. 1056 (D. Me.  1981) (holding that  state tax on            federal credit  unions violated the Supremacy  Clause and the            Federal Credit  Unions Act because federal  credit unions are            federal instrumentalities).                           We appreciate,  as debtor  pointed out  below, that            private institutions  deliver many of the  services performed            by federal credit unions.  In the more than sixty years since            the Federal Credit Union Act's passage, federal credit unions            have,  undeniably,  increased  in  number  and  significantly            expanded   the   services  they   provide.     Today,   these            institutions  offer an  increasingly complicated  and complex            array of financial services.  United States v. Michigan,  851                                          _________________________            F.2d  at 805;  see generally  Federal Credit  Union Handbook,                           ___ _________  ______________________________            supra at 11-14.             _____                      We firmly reject,  however, debtor's argument  that            this fact militates against a finding in TIFCU's favor.  That            federal  credit unions  now have  the capacity to  compete on            quasi-equal  footing with  other financial  institutions does            not alter  our conclusion  that they perform  a predominantly            governmental purpose.   We echo the  district court's insight            that  "the extent to which a federal credit union resembles a            bank should  [not] be determinative  of the issue  before the            court."   TI Federal Credit  Union, 183 B.R.  at 4.   We also                      ________________________            note  that internal  characteristics, such as  limitations on                                         -28-                                          28            membership  and location,  distinguish federal  credit unions            from proprietary institutions such as banks.  Banks, with few            exceptions, may  do business wherever and  with whomever they            wish.   Federal credit unions, in contrast,  must limit their            memberships  and, therefore, business  operations, to "groups            having  a common  bond  of occupation  or association,  or to            groups  within a  well-defined  neighborhood,  community,  or            rural district."  12 U.S.C.   1759.                       Finally,  we,  like  our  colleagues  on the  Sixth            Circuit, find  two additional features  federal credit unions            share   conclusive   --   tax   exemption   and  governmental            regulation.   Congress,  in exempting  federal  credit unions            from  federal income  taxation, has  expressed the  view that            federal  credit  unions  serve  several  unique  governmental            purposes and  are, therefore, different from  banks.  Section            501(c)(1)(A)  of  the  Internal  Revenue  Code   provides  an            exemption  for  "[a]ny  corporation  organized  under  Act of            Congress which is an instrumentality of the United States . .            . if such  corporation is  exempt from  Federal income  taxes            under  such Act as  amended and supplemented  before July 18,            1984 . . .  ."  26 U.S.C. section  501(c)(1)(A)(i)."  Because            the  Federal  Credit  Union  Act expressly  provides  federal            credit unions  an exemption from  federal, as well  as state,            territorial, or  local taxation, federal  credit unions  fall            within  the parameters of this provision.  Cf. La Caisse, 563                                                       __  _________                                         -29-                                          29            F.2d at 509; see 12 U.S.C.   1768; see also Rev. Rul. 55-133,                         ___                   ___ ____            superseded by  Rev. Rul.  60-169 ("Federal credit  unions are            __________ __            recognized as  instrumentalities of the  United States within            the  meaning of  section  501(c)(1) of  the Internal  Revenue            Code"); Rev.  Rul. 60-169  ("Federal Credit Unions  organized            and operated in accordance with the Federal Credit  Union Act            are  recognized as  instrumentalities  of  the United  States            within the meaning of section 501(c)(1) of  the Code"); Bruce            R. Hopkins,  The Law of Tax-Exempt Organizations 323-24, n. 1                         ___________________________________            (1983).                        This  tax  exemption  strengthens  our   view  that            Congress regards  federal credit  unions in a  special light.            By  this,  we  do  not  mean  to  suggest  that  a  necessary            correlation exists between federal instrumentality status and            tax  exemption.  The Internal Revenue  Code itself belies the            value in drawing such  an inference, for it also  provides an            exemption  for state credit  unions under Section  501.  Yet,            such entities clearly are not federal instrumentalities.                        The  manner  in  which  Congress  exempted  federal            credit   unions  from  taxation   is,  however,  significant.            Congress did not treat federal and state credit unions alike;            it  addressed federal  and  state credit  unions in  entirely            different sections of the Internal  Revenue Code.  La Caisse,                                                               _________            563  F.2d at  509.   State credit  unions are  exempted under            Section   501(c)(14),  whereas,  federal  credit  unions  are                                         -30-                                          30            exempted under  Section 501(c)(1).  Id.   Section 501(c)(14),                                                ___            unlike   Section   501(c)(1),   neither    mentions   federal            instrumentalities nor draws a direct relationship between the            federal government and the  services provided by state credit            unions.   These aspects of  the tax exemption  federal credit            unions  receive  support  our belief  that  Congress  regards            federal credit unions as federal instrumentalities.                       The  imprimatur Congress  places on  federal credit            unions by way  of tax  exemption is not  the only  additional            feature which convinces us  of federal credit unions' special            status.        Extensive   government    regulation   further            distinguishes federal credit unions from ordinary proprietary            organizations.  The NCUA administers programs and promulgates            regulations  for  credit  union  chartering,  membership, and            governance  in accordance  with the  Administrative Procedure            Act, 5 U.S.C.A.    551 et seq.   See 12  U.S.C.   1752a;  see                                   __ ___    ___                      ___            also 12 C.F.R.    701.1, 708, 709, 710; National Credit Union            ____            Administration,  Chartering and  Field  of Membership  Manual                             ____________________________________________            (1994).    It   promulgates  regulations  concerning   credit            practices,  12  C.F.R.  Part 706;  dissemination  of  savings            program  information,  12  C.F.R.      707.0-06;  payment  of            dividends, 12  C.F.R.   707.7; and inter  alia, insurance and                                               _____  ____            group purchasing  plans, 12  C.F.R. Part  721.   Finally, not            unlike  other  executive  branch  agencies,  the  NCUA issues            revised rulings  which  provide  guidance  to  credit  unions                                         -31-                                          31            operating  in the  field.   See  12  C.F.R. Ch.  VII  (1-1-95                                        ___            Edition).                      The  decentralized system  in which  federal credit            unions operate  does not minimize the  significance of NCUA's            regulatory acts, the weight to be accorded the Federal Credit            Union  Act's  careful  delineation of  federal  credit  union            powers, or  the significance of the  other statutes governing            federal credit union activities.   See e.g. Truth in  Lending                                               ___ ___            Act,  15 U.S.C.   1601 et seq.; Equal Credit Opportunity Act,                                   __ ____            15  U.S.C.    1601  et seq.;  Fair  Credit Reporting  Act, 15                                __ ____            U.S.C.    1681  et seq.;  Home  Mortgage Disclosure  Act,  12                            __ ____            U.S.C.   2801; and the Fair Debt Collection Practices Act, 15            U.S.C.    1692 et  seq.   Federal  credit  unions do  not,  a                           __  ____                                     _            fortiori,  wield  powers  akin  to those  employed  by  banks            ________            because they are  member-owned and authorized, through  their            individual boards  of  directors, to  develop guidelines  for            their  operation or  independently  make decisions  about the            services they provide.   Cf. United States v. California  Bd.                                     __  ________________________________            of  Equalization,  2 Ca.  State  Tax Rep.  (CCH),    400-071,            ________________            aff'd,  709 F.2d 1518 (9th  Cir. 1983).   Any suggestion that            _____            they do misses, what the Supreme Court, in  Federal Land Bank                                                        _________________            v. Bismark, regarded as a fundamental point:  "[t]he  federal            __________            government  is one  of  delegated powers,  and  from that  it            necessarily follows  that any constitutional  exercise of its            delegated  powers is  governmental."   314 U.S.  at 102.   We                                         -32-                                          32            refuse  to  penalize federal  credit unions  for successfully            performing  the governmental functions  assigned them.   And,            therefore, we  find that increases  in the number  of federal            credit  unions  and  improvements  in  federal  credit  union            services indicate that the Federal Credit Union Act's goal of            providing  credit at  reasonable  rates is  being  met.   See                                                                      ___            United States v. Michigan, 851 F.2d at 806.            _________________________                      We hold, moreover, that performance of governmental            functions,   exemption  from   federal  tax,   and  extensive            government  regulation  are  compelling  indicia  of  federal            instrumentality  status.   In  the  past,  such factors  have            persuaded  this  court  to   make  a  finding  of  government            instrumentality status.  In Federal Reserve Bank of Boston v.                                        _________________________________            Comm'r of  Corporations and  Taxation of the  Commonwealth of            _____________________________________________________________            Massachusetts,  499 F.2d 60 (1st Cir.  1974), for example, we            _____________            recognized federal reserve banks as federal instrumentalities            on  the basis of  characteristics shared,  in large  part, by            federal credit unions.  Two characteristics of federal credit            unions, acting as a depository for  public monies and serving            as a fiscal  agent of the United States,  figured prominently            in our analysis.  499 F.2d 60, 62.                         Similarly, in United  States v.  State Tax  Comm'n,                                    ____________________________________            481  F.2d 963  (1st  Cir. 1973),  we  concluded that  federal            savings and loans associations are federal instrumentalities.            481 F.2d at 969; see also Federal Reserve Bank of Boston, 499                             ___ ____ ______________________________                                         -33-                                          33            F.2d  at 62.  That case,  like Federal Reserve Bank of Boston                                           ______________________________            and  many of the  other cases involving  questions of federal            instrumentality status, concerned the validity of state taxes            imposed  on federal  entities.  See, e.g.,  United States  v.                                            ___  ____   _________________            Michigan,   851   F.2d  at   803;   Keifer   and  Keifer   v.            ________                            _________________________            Reconstruction Finance  Corp., 306 U.S. 381,  390 n.3 (1939);            ____________________________            United States v. Maine, 524 F.Supp. at 1056; United States v.            ______________________                       ________________            California Bd. of Equalization, 2 Ca. State Tax Rep. (CCH),              ______________________________            400-071,  aff'd,  709  F.2d   at  1518.    We  held   that  a                      _____            Massachusetts tax imposed an impermissible burden on  federal            savings  and  loans  because  it  provided  a  deduction  for            governmental institutions that were  very similar to  federal            loan   associations,  but   not  for   federal  credit   loan            associations themselves.  481  F.2d at 963.  In  reaching our            decision    that    such     organizations    are     federal            instrumentalities,  we noted that  federal savings  and loans            are federally  created banks,  chartered and regulated  by an            executive  branch entity,  the Federal  Home Loan  Board, and            that "they  serve the  statutory purpose of  providing 'local            mutual thrift  institutions in which people  may invest their            funds  and .  . .  for the  financing of  homes, .  . .   [a]            purpose .  . . said to affect the welfare  of the nation as a            whole."  481 F.2d  at  967-78.   Federal  credit unions  have            similar characteristics and purposes.                                         -34-                                          34                      In  United  States   v.  State   Tax  Comm'n,   we,                          ________________________________________            admittedly, indulged  the  argument that  credit  unions  and            federal savings and loans can be distinguished.  But, few, if            any,  inferences can  be drawn from  our recognition  of such            distinctions  because  United  States  v.  State  Tax  Comm'n                                   ______________________________________            involved  state, not  federal, credit  unions.   State credit            unions  are altogether  different  entities;  unlike  federal            credit unions,  they are neither chartered  under the Federal            Credit Union Act, nor regulated by the NCUA.                        It does not, of  course, follow that no differences            between   federal   credit   unions   and   federal   savings            institutions  exist.   The  United States  Supreme Court  has            itself  held  that federal  credit  unions  and federal  loan            associations are  "far from  identical."  First  Federal Sav.                                                      ___________________            and Loan  Ass'n of Boston v. State  Tax Comm'n, 437 U.S. 255,            ______________________________________________            260  (1978).  The basis  for its holding,  however, rested on            the assumption  that federal  credit unions are  more closely            tied to  the government and  its functions than  federal loan            associations,  not  less.    As  the   Court  noted  when  it            considered some  of the  same issues we  addressed in  United                                                                   ______            States  v.  State  Tax  Comm'n: Congress  has  "long  treated            ______________________________            federally  chartered  credit  unions  differently  [and  more            favorably than]  . . .  federally chartered savings  and loan            associations."  437 U.S.  at 260.  This special  treatment is            evident  in the  tax exemptions exclusively  afforded federal                                         -35-                                          35            credit  unions  and insurance  programs  designed  to protect            federal credit union deposits.                        We think  it plain that federal  credit unions are,            as  a  general   matter,  federal  instrumentalities.     Our            statement  in Northeast  Federal Credit  Union v.  Neves, 837                          __________________________________________            F.2d  531 (1st Cir. 1988), that federal credit unions are not            federal agencies does  not detract from this conclusion.  The            principles addressed  in that case are  not directly relevant            here.  Furthermore, we make no effort to liken federal credit            unions  to government  agencies; we  are persuaded  only that            they are government instrumentalities, lesser in scope and in            responsibility than actual government agencies.               D.        Is Treating TIFCU As A Governmental Unit Consistent            D.        Is Treating TIFCU As A Governmental Unit Consistent                      With the  Purposes of the Statute?                      With the  Purposes of the Statute?                      Our analysis in  this case  does not  end with  our            conclusion   that  federal   credit  unions   are  government            instrumentalities.   We must  still resolve  whether treating            federal credit unions as federal instrumentalities and, thus,            as government  units, is consistent  with the purposes  of 11            U.S.C.  section  523(a)(8).    Each  instrumentality must  be            examined in "light of its governmental role and the wishes of            Congress  as  expressed in  relevant  legislation."   Federal                                                                  _______            Reserve Bank of Boston, 499 F.2d at 64.            ______________________                      It is undisputed that Section 523(a)(8) was enacted            to prevent abuses in student loan programs.  In re Pelkowski,                                                         _______________            990 F.2d at 742.  Its  history, which begins in 1976 with its                                         -36-                                          36            precursor, Section 439A of  the Education Amendments of 1976,            reflects a congressional intent to minimize the opportunities            to use bankruptcy as  a way of avoiding repayment  of student            loan  debts.     Id.    Section   439A,  which  limited   the                             __            dischargeability  of only  guaranteed or  insured educational            loans,  was   enacted  after  the  1973   Commission  on  the            Bankruptcy Laws of the  United States described the incidence            of debtors attempting to  discharge educational loan debts in            bankruptcy  as   "reprehensible"   and  a   "threat  to   the            continuance of educational loan programs."  H.R. Doc. No. 93-            137, 93d. Cong., 1st  Sess., Pts. I and II  (1973), reprinted                                                                _________            in  App. 2  Collier,  pt. I,  at 176-77;  see also  Jerome M.            __          _______                       ___ ____            Organ, Good  Faith and the Discharge of  Educational Loans in                   ______________________________________________________            Chapter 13:  Forging A Judicial  Consensus, 38 Vand.  L. Rev.            __________________________________________            1087, 1093-97 (1985).                           Section  439A was later  reconsidered by  the House            Subcommittee  on Civil  and  Constitutional Rights,  but  the            nondischargeability  policy contemplated  nevertheless became            part  of  the  Bankruptcy  Reform  Act  of  1978  through  an            amendment  made to H.R.  8200.  In re  Pelkowski, 990 F.2d at                                            ________________            742.   Representative  Allen Ertel  introduced the  amendment            which   eventually  became  Section  523(a)(8),  noting  that            defaults  and delinquencies in  federal student loan programs            increased by more than three hundred percent between 1972 and                                         -37-                                          37            1976.  H.R. No. 95-595, reprinted in App. 2  Collier, pt. II,                                    _________ __         _______            at 537.  Representative Ertel explained:                      [T]hese bankruptcies could easily destroy                      the federal student loan programs . . . .                      This  problem  cannot  be   permitted  to                      spread nationwide, because destruction of                      the student loan  programs would  operate                      to  deny the benefits of higher education                      to   many   would-be  students   who  are                      otherwise qualified  for post-high school                      education  or  training  .   .  .  .  The                      destruction  of   student  loan  programs                      would represent a tremendous waste of one                      of  this  nation's  greatest assets,  the                      minds and skills of American youth.             Id.  Representative Ertel's statements are noteworthy, though            ___            admittedly  not  conclusive  of  Congress'  intent,    In  re                                                                   ______            Pelkowski,  990 F.2d  at  743 (citing  Consumer Prod.  Safety            _________                      ______  ______________________            Comm'n v.  GTE Sylvania,  Inc.,  447 U.S.  102, 118  (1980)),            ______ ______________________            because  they were supported by a number of legislators.  Id.                                                                      ___            at 742-43.  Both Senator DeConcini and Representative Edwards            mentioned  the amendment  on  the floor  of their  respective            chambers.    See   id.  at   742.    On   the  House   floor,                         ___   ___            Representative Edwards also explained that "Section 523(a)(8)            represents a compromise between the House bill and the Senate            amendment  regarding educational loans."  124 Cong. Rec. p. H            11096,  reprinted in App. 3 Collier on Bankruptcy, pt. IX, at                    _________ __        _____________________            101.  Representative Edwards went on to clarify that  Section            523(a)(8)  would  only  make  educational  loans   issued  by            governmental units or nonprofits nondischargeable and that it                                         -38-                                          38            would  broaden the bankruptcy laws  in effect at  the time by            extending coverage to non- federally insured loans.  Id.                                                                   ___                      In  its  original   form,  Section  523(a)(8)  only            referred to loans  acquired from a  "governmental unit, or  a            nonprofit institution  of higher education for an educational            loan."  Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92            Stat.  2549 (1978); see  also In re  Segal, 57 F.3d  342 (3rd                                ___  ____ ____________            Cir.  1995).  This  version of  the subsection,  however, was            short-lived.      Congressional    efforts   to   limit   the            dischargeability of educational loans by expanding the  types            of   loans  or  institutions  covered  by  Section  523(a)(8)            continued  after  1978.    Amendments made  in  1979  rewrote            Section  523(a)(8)  to  include  "educational  loan[s]  made,            insured, or guaranteed by a government unit or made under any            program funded in whole or in part by a governmental  unit or            a nonprofit institution  of higher education".  Act of August            14,  1979,  Pub.  L.   No.  96-56,     3(1),  93   Stat.  387            (1989)(amending 11 U.S.C.   523(a)(8) (1979).                       In  1984, the  Bankruptcy  Amendment  Act  of  1984            struck the phrase "of higher education," from Section (a)(8).            P.L. 98-353, section 454(a)(2).  This extended the provisions            of that section  to all nonprofit  loan programs, not  merely            those associated  with  an institution  of higher  education.            When  read  together,  the  1979  and  1984  amendments  made            nondischargeable loans issued pursuant to an educational loan                                         -39-                                          39            program   operated   by  a   nonprofit   organization   or  a            governmental  unit  and  educational  loans  acquired from  a            commercial financial institution, if such loans were  insured            by a  governmental unit.  See  In re Segal, 57  F.3d 342, 346                                      ___  ___________            (3rd Cir. 1995).                      Amendments made  in 1990, by the  Crime Control Act            of 1990, altered Section  523(a)(8) yet another time.    They            expanded nondischargeability to encompass  educational loans,            as  well as educational  benefit overpayments and obligations            to   repay  funds   received   as  an   educational  benefit,            scholarship  or stipend.   Crime Control Act  of 1990, Pub.L.            101-647,   3621(1), 104  Stat. 4865 (1990)(amending 11 U.S.C.               523(a)(8) (1984)).  The  1990 Amendment also  made it more            difficult for debtors to take  advantage of the exceptions to            nondischargeability.   It  increased from  five to  seven the            number of years which  must have elapsed between the  date an            exception  seeking debtor's  loans first  became due  and the            filing of the bankruptcy petition.  Id. at section 3621(2).                                                ___                      Viewed against  the backdrop of the Bankruptcy Code            as a whole, Section  523(a)(8) and the amendments made  to it            are  aberrations  from  the   norm.    Congress  drafted  the            Bankruptcy  Code  to  effectuate  the   "general  purpose  of            providing  debtors with  'a new  opportunity in  life with  a            clear field for future effort, unhampered by the pressure and            discouragement of pre-existing debt.'"   In re Alibayata, 178                                                     _______________                                         -40-                                          40            B.R.  335,  337 (E.D.N.Y.  1995) (quoting  Local Loan  Co. v.                                              _______  ______________            Hunt, 292  U.S. 234 (1934)).  The Code, thus, was intended to            ____            be a mechanism for  liberal discharge of debt.   Even Chapter            7,  the  Code  section  under which  debtor  currently  seeks            relief,  reflects that  purpose  by entitling  debtors to  "a            discharge of all debts except obligations . .  . specifically            except[ed] from  discharge."   Jerome M. Organ,  'Good Faith'                                                             ____________            and the Discharge of Educational Loans in Chapter 13: Forging            _____________________________________________________________            A Judicial Consensus, 38 Vand. L. Rev. 1087, 1093 (1985); see            ____________________                                      ___            also 11 U.S.C.    727(b).   Section  523(a)(8), in  contrast,            ____            departs  significantly  from  the   liberal  dischargeability            policy manifested in  the bankruptcy laws.   In re Alibayata,                                                         _______________            178  B.R. 335, 337 (E.D.N.Y.  1995).  From  its inception, it            has operated as  a limit on code sections such  as Chapter 7,            primarily  on the theory that the there are some instances in            which  a creditor's  interest in  recovering full  payment of            debts  outweighs the  debtor's interest  in a  complete fresh            start.    See Grogan  v. Garner,  498  U.S. 279,  287 (1991).                      ___ _________________            Thus,  whereas  the Bankruptcy  Code  focuses  on the  impact            financial  problems  have  on  individual   debtors,  Section            523(a)(8) concentrates on the impact individual debtor's have            on  future educational  debtors and  institutional creditors,            particularly  unsecured  creditors like  TIFCU.    Cf. In  re                                                               __  ______            Alibatya, 178 B.R. at 337.  Section 523(a)(8) sends the clear            ________            message that the interest in ensuring the continued existence                                         -41-                                          41            and  operation  the educational  loan programs  of government            units and nonprofit organizations supersedes the  interest in            minimizing the financial  difficulties of individual debtors.            See id.;  In re Merchant, 958 F.2d  738, 740 (6th Cir. 1992).            ___ __    ______________            Its purpose,  essentially, is to preclude certain educational            loan  debtors  from taking  unfair  advantage  of the  Code's            "fresh start" policy.  In re Lohman, 79 B.R. 576, 580 (D. Vt.                                   ____________            1987).                       We  are  convinced  that  treating  federal  credit            unions   as   "government   instrumentalities"   and,   thus,            "government  units," is  consistent with  Section 523(a)(8)'s            discharge-limiting purpose.   "By enacting Section 523(a)(8),            Congress  sought principally  to protect  government entities            and nonprofits -- places which  lend money or guarantee loans            to individuals for  educational purposes  -- from  bankruptcy            discharge."  In  re Segal, 57 F.3d at 348.  Including federal                         ____________            credit  unions within  the universe  of entities  regarded as            government units under Section 523(a)(8), in accord with this            purpose,  reduces  opportunities  for   dischargeability  and            minimizes opportunities for fraud.                        Without imputing any fraudulent intent to DelBonis,            we point  out that  narrowly construing the  term "government            unit"  to  exclude  federal  credit  unions  would  create  a            perverse incentive for educational  debtors.  A definition of            "government  unit" which excludes federal credit unions would                                         -42-                                          42            encourage    debtors   to    circumvent   nondischargeability            provisions  by taking all their school loans out with federal            credit unions or,  as in  the present case,  having a  family            member do  so.  Educational loan programs  could be decimated            by this  and millions  of students, individuals  probably not            unlike the members of debtor's family who benefitted from his            dealings  with  TIFCU,  would ultimately  be  precluded  from            pursuing opportunities in higher education.  See H.R. No. 95-                                                         ___            595, reprinted in App. 2 Collier, pt. II,  at 537 (Remarks of                 _________ __       ________            Representative Ertel).                          This result  clearly would be in  conflict with the            legislative goals  manifested in  Section 523(a)(8).   And we            note, though it does not bear directly on our  interpretation            of  Section 523(a)(8),  that it  would undermine  the Federal            Credit Union Act  as well.   One of the Federal  Credit Union            Act's primary goals is  to "make more available to  people of            small means credit for provident purposes."  12 U.S.C.   1751            et seq.   Allowing educational loans issued by federal credit            __ ___            unions to be freely  discharged in bankruptcy could devastate            many federal credit unions.  Because loans comprise the major            part  of  the  federal  credit union  investments,  it  would            drastically decrease opportunities  for working class  people            to obtain credit.    Federal credit unions, as  mutual thrift            institutions,  rely on  members  like DelBonis  to repay  the            debts they accrue, even if those debts are incurred on behalf                                         -43-                                          43            of  a non-member relative.  Cf. In  re Wilcon, 143 B.R. 4 (D.                                        __  _____________            Mass.  1992)  (holding  Section  523(a)(8)  includes debt  of            parent taken out on behalf of a child).                             We   think  it  extremely  unlikely  that  Congress            ascribed a meaning to "government unit" which would frustrate            not  one, but two of its  legislative enactments.  Therefore,            we  hold that,  federal  credit unions  are government  units            within the  purpose  and meaning  of 11  U.S.C.    523(a)(8).            Absent  the   applicability  of   one  or  both   of  Section            523(a)(8)'s exceptions, the loans debtor obtained from  TIFCU            are  nondischargeable.     This  case  is   remanded  to  the            bankruptcy court for a determination of whether either of the            exceptions  to Section  523  (a)(8)  nondischargeability  are            applicable in this case.                                         -44-                                          44
