Tuition Fees (non-loan)

[turtle19]

So, our case is *this close* to final discharge. We expect it to happen later this week or next and all is well. We've now come up against a small issue. One of the debts listed is for about $500 in tuition/school fees to a community college from before we filed. These are just regular fees charged by the school and were NOT covered by a loan, grant or any of the kind. We were paying those fees directly out of pocket until that semester, when everything fell apart on us. I continued taking the courses and received my grades. This was all done well before we filed. The school never dropped me for non-payment of tuition and I actually have access to my transcript. Again, no student loans of any kind were involved here and the debt was included in our bankruptcy.

Now, we've learned they've placed a registration hold and I am not allowed to register for additional classes until it is paid. Now, that's fairly normal and I wouldn't argue it except that this is included in the bankruptcy, and is NOT related to a loan. I'm reading a fairly equally differing opinions on this. Some seem to say that if it isn't a government backed student loan, then it is dischargeable. I've also seen opinions that state any "educational benefit" received is non-dischargeable.

In my reading of 523(a)(8)(A)(ii) I can see where that phrase comes in, but I think maybe some people are reading it wrong????

"(8)(A) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for— ... (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend..."

The way I read this is that it refers to non-dischargeable debts as "funds received as an educational benefit" ... Got it. That means loans and the like. But, I didn't receive any funds as an educational benefit in this case. This is simply a bill for tuition that didn't get paid. Even if I did get a student loan for that semester and failed to my tuition... IMO, the tuition would STILL be dischargeable, but the loan (or funds) I received as a benefit would not. Am I missing something? I see the bill for tuition and fees separate from loans given. In my case, no loan was involved anyway.

Can somebody let me know if I'm right or not here?

On a different, ironic note... because of our financial status, I actually received a financial aid tuition waiver from the same school for this fall -- it's the CA Board of Governor's grant. But, the school won't let me register until the previous debt is cleared. I reminded them about the bankruptcy and the lady at the admissions office said they were exempt from bankruptcy issues and I have to pay up. Right now, I disagree with that... and while we aren't yet discharged, I was hoping to register as soon as the discharge came through. Instead, the admissions office followed up by mailing me a bill.

[turtle19]

PS... this is similar to what my issue is about: http://www.heag.us/node/32

It's my position that this is dischargeable and the school is violating the stay by sending a bill, since we are not yet discharged. But, it's really close to happening and I don't want to muddy it all up now.

[justbroke]

The way that I have always understood this is that the bankruptcy code uses "educational benefit" or loan. it does not matter if it's a government backed or if it's a non-profit institution. There is also another "escape" clause for simply educational benefits that are not loans. By escape clause, I mean it's in the favor of the school/entity.

If you feel that there is a question of dischargeability, you would file a Complaint to Determine Dischargeability under the Adversary Proceeding (AP process).

Now, your argument may be that it wasn't a loan, just a bill. In either case, the school seems to have taken a position. In order to negate their position, one of you (either the school or you) would need to file a Complaint. A strategy that I would use, is to send the a DEMAND NOTICE that they are in violation of the automatic stay provisions of 11 USC 362 and are subject to sanctions for coercing you to pay a dischargeable debt. Give them a deadline of 10-14 days to respond and let them know in the letter that you'll seek sanctions on the 15th day. You may also mention that you're prepared to file a dischargeability complaint (which could cost them thousands to defend the $500 in billing!).

Now, the strategy does two things. First, it makes them re-evaluate their position. Second, it will make them respond as to what their legal grounds for withholding registration. At this point, at least you'll know where they stand. In the best scenario, they get scared, flinch, and allow you to register. IN the worse case, you are in no worse position but you'll know their position. You can then decide whether you want to file a dischargeability complaint. If the school was smart, they probably won't fight a dischargeability complaint over $500!

[turtle19]

Thank you. I may just tell them I'm going to file as a scare tactic and see how they respond. Question, though... we're due to discharge any day now.... literally, any day. The court just received our final fee installment payment and we are actually more than 60 days past our 341 at this point. There's nothing holding it up now. We had a couple extra weeks because we were paying in 4 installments. We know they got the final payment so at this point, it could happen any time and the stay will be lifted. Does it matter if we go past that date? I mean, the bill they sent obviously was sent under the stay, and I'm more than prepared to threaten them over that one if they keep it up... but I don't really want to pursue it if I don't need to. We just want to get on with life and try to rebuild. Plus, per the link I posted above, in reviewing it, it is almost exactly the same situation as ours and I'm more than happy to reference that court decision in my letter telling them I'll file a complaint. From the article:

The Student argued that his obligation to the College was dischargeable and that the College, for the purposes of bankruptcy, was simply an unsecured creditor.
The Court ultimately agreed with the Student. It looked to the common law definition of ‘loan’ to interpret the meaning of 523(a)(8). The Court reasoned that under the Common Law, ‘to constitute a loan there must be (i) a contract, whereby (ii) one party transfers a defined quantity of money, goods, or services to another, and (iii) the other party agrees to pay for the sum or items transferred at a later date.’ The court concluded since the College never made any inquiry into the Student’s credit worthiness and never required the Student to execute any kind of promissory note or loan agreement, that the College did not intend to loan the student the amount of the tuition for the Fall 1993 semester.

The Court added that, unlike a program such as a federally funded loan program whereby the student can not escape repayment by filing for bankruptcy, in this matter no funds were ever advanced by the College or received by the student for the semester in question. Therefore, the obligation remained an unsecured debt owed to the College.
Accordingly, the U.S. Court of Appeals affirmed the earlier judgment.

[justbroke]

What you post is what I'm saying, however, the time for argument, as to whether it's technically a "loan" under the definition of a loan or "educational benefit" (which is NOT a loan). However, the information you posted in the quote above was from a pre-BAPCPA (October 2005) case. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) clarified and changed how and whether these items are dischargeable, so the cited case is may not offer any precedential affect.

(FYI, the case you reference is Boston University v. Rajesh Mehta, Docket No. 01-2586.)

As I wrote early, just make a demand letter. Do not quote or reference that 2001 case as it is meaningless after the changes in the BAPCPA of 2005. Your job, at this point, is to see what they are "thinking" and what type of position that they hold. Until then, you should not quote any cases which may not even have any affect. The ultimate way to determine dischargeability, of course, is to file a complaint to determine dischargeability.

This would not hold up your discharge. This would only affect the closing of your case.

[turtle19]

This one has been handled. I sent a letter to the college district (the school that placed the hold is one of several in a larger district), and their legal office called me today and said that school was wrong to send the bill. They agree that this was not loan related nor falls under the category of a "benefit" as a result of funds received. It was simply a bill that I didn't pay. The holds will remain in place until they receive the notice of discharge... but they lifted the holds for 24 hours so that I could register for the fall Semester. Their automated system will automatically put the holds back on because the balance is still sitting there outstanding. The lawyer for the school said that they can't remove it until the discharge paperwork is received. It has something to do with audits and controllers.

The better news is that our case was discharged today, and is now just awaiting close. Pretty good day all-round.

[LadyInTheRed]

Yey! Glad it worked out so well.

Congratulations on the discharge!