Discharge injunction requires school to release transcript

[keepmine]

[i]

http://stjohns.abiworld.org/node/91

[WhatMoney]

Novus Law School (a non-accredited, internet based law school offering 2 year degrees) should have required tuition be paid up front before he could take the online courses. How did Moore end up with an unpaid tuition balance? Did Novus have a study now pay later policy?

Another comment on this case (and another one like it.):

Sep 02, 2009
So, you owe some tuition and/or fees to an institution of higher learning and you file bankruptcy.

After filing, you go to get a transcript to send to a potential employer or graduate school.

The University says: "Sorry, no transcript, you owe tuition. We have a policy of not providing transcripts if we're owed money."

The Debtor says: "But I filed bankruptcy!"

The University says: "So?"

Uh - Colleges? Universities? Law Schools? Don't be that institution. Two recent cases deal with situations where a bankrupt debtor was denied a transcript. The first was out of the 7th Circuit Court of Appeals. In re Kuehn, 563 F.3d 289 (7th Cir. 2009). The second is - and they really should be ashamed of themselves for not knowing better - a Law School: In re Moore, 407 B.R. 855 (Bankr. E.D. Va. 2009).

In Kuehn, the debtor owed Cardinal Stritch University over $6,000 in tuition. The debtor offered to pay for the transcript in advance, but the University refused to provide a copy, both prior to discharge (when the automatic stay was in place) and after discharge (when it was replaced by the discharge injunction, which is an injunction against any attempt to collect a discharged debt).

The Seventh Circuit concluded that the information - the grades - were the joint property of the student/debtor and the University, and the refusal to provide the transcript was an attempt to collect a debt - the tuition money. "The University's refusal to honor that right until Kuehn paid her back tuition was an act to collect a debt and thereby violated the automatic stay and discharge injunction." Judgment for debtor affirmed.

The Moore decision was factually similar, but also involved the refusal to issue a degree. Tuition was owed and not paid, and because the debt wasn't for a student loan - it was just a failure to pay tuition - the debt was discharged in the debtor's Chapter 7.

Because the tuition wasn't paid, Novus Law School (a non-accredited, internet based law school offering 2 year degrees) refused to grant the degree or issue a transcript. The debtor first brought the action under the all-but useless Section 525, and that was dismissed without prejudice. Then, he hit bringing the action based on violation of the discharge injunction, Section 524, and won. There was the little problem associated with violation of the discharge injunction remedy - but the court determined that a coercive sanction of a judgment of $10,000 would issue if the degree was not awarded and the transcript not provided.

Keep in mind that these were cases involving dischargeable debts for unpaid tuition, not non-dischargeable student loans. "An action to collect on a non-dischargeable student loan by a creditor after the debtor has been granted discharge is not a violation of the discharge injunction. See, e.g., McKay v. Ingleson, 558 F.3d 888, 891 (9th Cir. 2009); In re Gakinya, 364 B.R. 366 (Bankr. W. D. Mo. 2007); In re Hoxie, 370 B.R. 288, 292-93 (Bankr. S.D. Cal. 2006); In re Haroon, 313 B.R. 686 (Bankr. E.D. Va. 2004)." Moore, at 859.

http://bankruptcywatercooler.com/viewtopic.php?f=2&t=86

[justbroke]

And not a Government-backed loan, so it was dischargeable and discharged! I hope people don't read this case wrong and look to the details.

[Shanfish]

I'm glad to see this posted. I am a little nervous since one of the debts I am hoping to discharge is an unpaid tuition bill. I was under the impression that once my tuition bill was handed over to the collection agency I would be able to get my transcript since according to my Student Accounts office the debt is no longer theirs. But of course, for transcript purposes that's not the case. I am hoping they don't hassle me about it and I can get it as soon as the Stay is in place. We are filing in August... what do I do if they refuse to give me the transcript after we are discharged?

[justbroke]

You need to read the actual case. This specific case was about a "non" government student loan. If your loan is government backed, this will not work.

[Shanfish]

Hmm, I must have misread. I thought this case was regarding a tuition/fees bill, not loans. I have a tuition bill.

[Brazzy]

I have to be honest and say this is BS. The education itself is a service, while the degree/diploma/transcript is a good. He never paid for the good, so he should not be awarded it. Thats the equivalent of me going to a car dealership. Picking out a car. Making the arrangements with the dealership to purchase the car. Then going and filing for BK and saying I dont have to pay for the car, but they have to give it to me anyway. Pretty weak. Bad precedence.

[Shanfish]

In my situation though, my transcript is being withheld based on coursework I was billed for but did not take. I fought it for a year! In October 2009 I applied as a non-matriculated student and was never notified about whether I was accepted (I had moved about 3 months after applying) In the Spring I called to find out was told that I had been automatically registered for classes in the program, which had begun that week. I was a student there for 6 years as an undergrad and you were never automatically registered for classes. It was always up to the student. Long story short, I was told to drop the classes ASAP and that I should not get a bill (in May) since not only did I NOT register for the courses, but I was never notified about acceptance into the program. All was well until July when I received a bill for $2800 for 2 courses and learned the person I spoke with in May was no longer there to explain to Student Accounts what had happened. This is the same university where I received my B.A., which is fully paid for with loans. They are withholding my transcript for my B.A. This tuition bill is the straw that broke the camels back as far as us filing BK. We were ready to just go through our Consumer Credit Counseling Services and get on a payment plan until the University got sick of trying to track down the person that made the mistake and sent me to collections.

After reading this article I am curious to know at what point they should HAVE to give it to me? After the stay is in place? Or after discharge? And what happens if they refuse? Will I have to pay the lawyer more to pursue this...we are scraping up what we can just to retain him.

[justbroke]

Some would say that the education itself is the goods. The diploma/certificate only authenticates the education.

Hmm, I must have misread. I thought this case was regarding a tuition/fees bill, not loans. I have a tuition bill.

No, I misread what you wrote. The ruling was on an unpaid tuition bill. (This is like the tax return versus a tax refund. You wrote "bill" and I saw "loan". Sorry!)

[Brazzy]

Some would say that the education itself is the goods. The diploma/certificate only authenticates the education.

Complete 115 credits at a school that requires 120, with the one course you skipped being a meaningless elective that taught you about African popular culture. You received all the education you need to pursue your career, but almost graduating and nearly having your diploma doesnt go well on your resume. Today most employers would treat you no different than a person who never attended in the first place. In the end its all about the piece of paper.

[justbroke]

In the end its all about the piece of paper.

Unfortunately, that's true. There's a comedian that jokes about how his Mom complains that if he had those last 4 credits he could say that he was a college graduate. He jokingly says... like if you don't get the credits, you can't say you're a college graduate. You'd try to say it but it would come out "I'm a cacka gackawitch".

[JFelix]

I am confused...what does “an obligation to repay funds received as an educational benefit.” mean...is it just a long way of saying A LOAN...OR does it mean something else?

[justbroke]

Yes, it's just legalese for a loan. This is what we pay Congressmen for.

[JFelix]

Yes, it's just legalese for a loan. This is what we pay Congressmen for.

Cool beans!! thanks!