When an individual files bankruptcy an automatic stay goes into affect. This means that creditors are not allowed to take any action to collect a debt, while the bankruptcy is pending in court. After the debtor receives a discharge in bankruptcy an injunction goes into affect, which forbids a creditor from taking action to collect a debt.
Actions that are forbidden under the automatic stay and the injunction go beyond the most obvious, such as demanding payment or garnishing wages. It can also include less direct actions such as utilities cutting off services for fees owed before the bankruptcy filing, or car lenders refusing to release the title on cars, which they are not willing to repossess.
One of the institutions that seem to take questionable actions in regards to these rules are schools. Schools frequently will not allow students to graduate or provide students with transcripts, when they have unpaid tuition or fees, even if those charges are discharged by bankruptcy. Sometimes schools have attempted to get around this rule by claiming the debts are student loans, which makes them non-dischargeable in bankruptcy. However, last year the Bankruptcy Court case in the Southern District of Indiana made it clear this position is not so easy to support. In Re Jessica Oliver made it clear that an agreement to pay tuition when a student takes classes is not a student loan. While the court felt this agreement creates a debt, it did not qualify as a “loan” because there was no advancement of funds from the creditor to the debtor or any agreement made when the services were provided to delay payment to some future date.
No comments:
Post a Comment