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New Member
Posts: 4
Registered: ‎08-14-2007
0

Can tuition fees be included in Chap 7

Hello All,
 
My husband filed Chapter 7 in 12/2005.  Included in the bankruptcy was an approx $1200 for a semester of tuition fees.  Once his bankruptcy was discharged he disputed the entry on his credit report and it was deleted.  Yesterday we checked his transunion report and found that that account is now listed with a collection agency.  He called EMU yesterday and they told him that educational fees cannot be included in a bankruptcy regardless of what the court papers state.  If we have to pay it fine but I feel that since it was technically listed in the bankruptcy they should not be allowed to collect.  Not to mention that the original debt was from 2000 and now it has been reaged to 2007.
 
Any thoughts???
Established Member
Posts: 22
Registered: ‎09-02-2007
0

Re: Can tuition fees be included in Chap 7

Hello,
 
Bad news.  Unfortunately your creditor is right.  The one bad thing about student loans, is that you cannot clear the debt through bankruptcy.  Your BK lawyer probrably failed to tell you that and they can list every creditor you have on the BK, but unfortunately you are stuck with that debt.  If they are giving you a low apr% keep the loan and pay them as best you can.  If they have increased your APR, wich most private student conventional loans do, talk to them and ask them to lower your apr, and payments so that you can afford to pay them back.  Also let them know, you want them to report your account in good standing (Current) to the CRA's in return for payments made on time.
 
PS  Family support, and child support payments owed - cannot be cleared with BK.
 
I hope this information help, and feel free to ask any questions.
New Member
Posts: 4
Registered: ‎08-14-2007
0

Re: Can tuition fees be included in Chap 7

Thanks for the reply and the info
 
Not sure if it matters or not but the debt is not from student loans but rather deferred billing for classes (He registered for the classes and they allowed him to attend without paying the tuition upfront).  Would this scenario still betreated in the same manner that you mentioned
Established Member
Posts: 22
Registered: ‎09-02-2007
0

Re: Can tuition fees be included in Chap 7

Hello,
 
Unfortunately it is.  Its the same as a defered payment loan.  Most institutions offer defered. 
 
PS Make sure he negotiates the payment and apr.
 
Hope this helps.
New Member
Posts: 4
Registered: ‎08-14-2007
0

Re: Can tuition fees be included in Chap 7

Thanks again.
 
We will definitely try to negotiate paying less than 100% and getting in deleted from his report.  We are hoping to buy a house this spring.  Seems like some new hurdle always comes up.
New Visitor
Posts: 1
Registered: ‎12-10-2007
0

Re: Can tuition fees be included in Chap 7

Hello All,
 
This might be helpful for you; a LONG read, but helpful.  You should go to your Attorney and see if this is something work litigating over:

Docket No. 01-2586, the College appealed a United States Bankruptcy Court finding that a student’s outstanding tuition balance owed to the College is not a loan and is dischargeable in bankruptcy. The College argued, to the contrary, that the outstanding balance of the student’s tuition and fees was a loan which could not be discharged since it was an ‘educational benefit’ or an “obligation for funds received as an educational benefit under 11 U.S.C. 523(a)(8), and therefore was not dischargeable in bankruptcy.

The Student attended the College from the Fall 1992 Semester through the end of the Fall 1993 Semester. The Student did not receive financial assistance for the Fall 1993 semester and did not pay his tuition bill. Nevertheless, the College registered the student and allowed him to continue to take classes. The student completed the semester and earned academic credit for three classes. Pursuant to Chapter 7 of the Bankruptcy Code, the student filed for voluntary bankruptcy. He listed the College as a general unsecured creditor, as he had failed to satisfy his financial obligation to the College.

The College contends that its willingness to allow the Student to enroll prior to him paying tuition constituted a loan to the Student. The College reasoned that since his tuition debt arose from an extension of credit for educational services, that the extension of credit was tantamount to an educational ‘loan’. The College argued it is well settled that an educational loan is not dischargeable in bankruptcy.

The College also argued that even if its extension of credit to the student was not a loan, the student’s delinquency is still not dischargeable because it represents an educational benefit under 523(a)(8). 11 U.S.C. 523(a)(8) reads:

(a) a discharge under section 727, 1141,
1228(a), 1228(b) or 1328(b) of this title
does not discharge an individual debtor
from any debt -
(8) for an educational benefit overpayment
or loan made, insured or guaranteed by a
government unit, or made under any program
funded in whole or in part by a governmental
unit or non-profit institution, or for an
obligation to rep ay funds received as an
educational benefit, scholarship or stipend,
unless excepting such debt from discharge
under this paragraph will impose undue
hardship on the debtor and the debtor’s
dependents.

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.

 
New Visitor
Posts: 1
Registered: ‎07-01-2008
0

Re: Can tuition fees be included in Chap 7

I am in a similar situation; I owe $1300 tuition to state university and want to include it in my list of creditors. There is no loan or contract, simply a past-due tuition bill. I plan to continue my education at this institution, but will receive full financial aid to cover all tuition, fees, books. My question: if the tuition I now owe is discharged, does the university have to release the hold on my student account so that I may register for classes for fall?
 
Thanks,
 
yardcat
Established Contributor
Posts: 971
Registered: ‎12-04-2007
0

Re: Can tuition fees be included in Chap 7

I suspect that you will have lots of problems until that 1300 is paid up.  The college can withhold transcripts and grades until it is paid.

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