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.