Is tuition dischargeable?

[anonymuse]

I had someone ask me if tuition is dischargeable. (It's owed to the college and no student loan is involved.)

I think it might be; however, I could see grades and transcripts being withheld without payment.

Any thoughts?

[HHM]

I think it is. I am not sure all the implications of the new BK law have been applied to student tuition, but at the same time, that particular provision of the BK code that deals with education benefits did not meaninfully change. There are several court decisions that hold that tuition "is" dischargeable as it is NOT a loan, and therefore does not fall under the student loan exception to discharge.

[wrinkleigh]

I had someone ask me if tuition is dischargeable. (It's owed to the college and no student loan is involved.)

I think it might be; however, I could see grades and transcripts being withheld without payment.

Any thoughts?

Schools are allowed to keep HOLDS on grades and transcripts -- BUT -- they MUST allow a student to get a transcript if the request is made in writing.

Withholding transcripts is considered an attempt to collect a debt, so in essence, their holds are useless. But you must call them on it, they wont offer that info voluntarily.

[lrprn]

Found this in a 2006 university bursars listserv posting at http://fa1.finadmin.virginia.edu/bur...2006/0119.html

"The following are excerpts from the National Association of College and
University Attorneys, "The Permissibility of Withholding Transcripts
Under Bankruptcy Law" published in 1995.

'...The anti-discrimination clauses (of the Bankruptcy Code) prevent
public entities, and, in some respects, private entities, from denying
various privileges to persons seeking bankruptcy protection. (Section
525) Together these provisions forbid the withholding of transcripts
during the pendency of a bankruptcy action and afterward if all debts
have been discharged. However, if debts are not discharged, withholding
transcripts is permissible once the bankruptcy action is final. ....The
filing of a petition for bankruptcy operates as an automatic stay and
prohibits the creditor from taking any action to recover a claim against
the debtor. ... The stay provisions prohibit withholding transcripts
DURING a bankruptcy proceeding unless the court has lifted the stay. It
is well established under the 1978 Bankruptcy Code that refusal to
release transcripts violates the stay (This provision remained in all
reformations of the Bankruptcy Code). An older case holding that
withholding transcripts was permissible under the 1898 Bankruptcy Act
was legislatively overruled by the new code. Violation of the stay
could subject the institution to payment of damages, attorneys' fees
and, in egregious cases, punitive damages. The court may grant relief
from the stay against the debtor, however, in ordinary circumstances, it
is unlikely the education creditor would be able to establish cause for
relief. ...

POST-DISCHARGE RESTRICTIONS ON WITHHOLDING TRANSCRIPTS: THE DISCHARGE
INJUNCTION: If the debtor has been discharged from all debts owed to a
creditor, the discharge injunction prevents any action to recover those
debts. The injunction is worded broadly enough to prohibit the
withholding of transcripts as an act to collect a discharged debt.
Therefore, it is important to determine first whether the debtor has
been discharged from debts owed to the education creditor. As a general
matter, certain debts owed to education creditors are not discharged by
a general discharge order. Those include debts for educational benefit,
scholarship or stipend that are made, insured or guaranteed by public or
nonprofit agencies or institutions unless the debt first became due more
than seven years before the bankruptcy petition was filed. Also
exempted from discharge are fines levied by governmental units that are
not in the nature of compensation for loss. However, debts to colleges
and universities other than educational loans or fines are ordinarily
not exempt and therefore are included in the general discharge.
Examples might include debts for University-provided goods and services,
such as medical treatment or pharmaceuticals, or library charges for
lost or unreturned books. One must first analyze whether the debt is of
the kind excepted from discharge and then determine whether the debt,
nonetheless, has been discharged. One should obtain a copy of the order
of discharge and ascertain if any other orders have been entered in the
case with respect to the dischargeability of debts. Absent any orders
specific to the education debt, a general discharge order will not
affect debts of the kind described above. ....The discharge injunction
states that a discharge under the Bankruptcy Code operates as a bar
against any act to collect, recover or offset the discharged debts
against the debtor. Refusal to permit students to order or gain access
to official transcripts after discharge of all debts clearly violates
the discharge injunction. The argument that refusal to release
transcripts is not an action, but a failure, to act has been rejected.
Congress intended this section to ensure that the debtor "will not be
pressured in any way" to repay discharged debts. Creditors who engage
in efforts to collect on discharged debts subject themselves to possible
fines and findings of contempt of court.'"