The Automatic Stay

[betpie]

Here is a fairly unique situation surrounding the automatic stay:

One huge benefit of filing bankruptcy for me is that I owe my former university nearly $3K for my last semester in college (it was summer, and I had used up all of my financial aid for the year). Because I still owe them a balance, they are withholding both my transcripts and my diploma. It really stinks.

I confirmed both in a free consult with a lawyer and with the school's collection/bankruptcy liaison herself that although my debt to the university will NOT be discharged, the school WILL be subject to the automatic stay and will have to cease withholding both transcripts and my diploma. In fact, the school's liaison seemed very, very cooperative (considering she was talking about being forced to give up her leverage against me) and wanted me to call her "as soon as" I file, to giver her my file number, so that she could "make sure the diploma is ready".

At the time that we had the conversation, I just chalked it up to the law working in my favor and this woman wanting to be compliant with the law. But, I have been reading the NOLO book and I just found out that creditors can petition to have the stay lifted, and with the judge's permission can continue collection actions.

So, am I just paranoid, or does it sound like this woman wants to beat me to the punch by having the stay lifted as soon as I file, and turning me away when I come to get the diploma? What creditors can have the stay lifted? What should I do? How can I get my diploma before she gets the stay lifted, if that's what she intends to do? Help!

[lrprn]

So, am I just paranoid, or does it sound like this woman wants to beat me to the punch by having the stay lifted as soon as I file, and turning me away when I come to get the diploma?

I think you are being paranoid. There are bk court case decisions around this very situation that set precedent for the college not being able to withhold your diploma once you file due to the automatic stay being in place. Withholding your diploma is the same as an unsecured creditor demanding payment for a debt after you file - a no-no. Sounds like the person you spoke to is familiar with these court decisions.

What creditors can have the stay lifted?

Any creditor can petition to have your stay lifted WITH CAUSE. Creditors - even universities - can't just file an objection because they want to. There has to be a legitimate reason.

What should I do? How can I get my diploma before she gets the stay lifted, if that's what she intends to do? Help!

What can you do? Calm down first and ask your lawyer whether the debt you owe the university is considered secured or unsecured - do you know?

[justbroke]

lrprn is spot on. There are many cases which have held that withholding things like diplomas (and even car titles!) are a violation of the automatic stay and basically contempt of court. No court, that I know of, is going to grant them relief so that they can do that.

Follow the steps that lrprn has laid out and you'll be fine!

[betpie]

Thanks for the replies- I have taken some deep breaths and had a good night's sleep, and I am calmer now. I don't know if the tuition I owe counts as secured or unsecured debt- will it make a difference for the purposes of the stay?