Legal Question in Bankruptcy in Virginia

Re: College Transcripts\Bankruptcy

You should consult with a Virginia lawyer to discuss the applicability of the law to the facts of your particular situation. The following is general legal information on whether withholding a student debtor�s transcripts is a violation of the automatic stay.

A discussion of this issue appears in In re Walker, 336 B.R. 534 (Bankr.M.D., Fla. 2005).

�...In support of its position, JU cites to a case in which a debtor unsuccessfully sought to compel Temple University to turnover transcripts that were being withheld for non-payment of a student loan. In re Billingsley, 276 B.R. 48, 53 (Bankr. D.N.J.2002). In Billingsley, the court held that the collection of a nondischargeable debt is not stayed by 11 U.S.C. � 362.1 Id. Specifically, the court stated that, ". . . Temple University's withholding of the transcripts is merely a refusal to perform on a promise to create and deliver a record of the debtor's academic performance. Such conduct is wholly consistent with the very purpose of the automatic stay: "to maintain the status quo that exists at the time of the debtor's bankruptcy filing." Id.

...As discussed below, various courts around the country have held that it is a violation of the automatic stay for a university to withhold a student debtor's transcripts.2

"A violation of 11 U.S.C. � 362 arises when a pre-petition creditor withholds a student debtor's transcript." Andrews University v. Merchant, 958 F.2d 738 (6th Cir.1992). In addition to holding that it is a violation of � 362 to withhold a debtor's transcripts, the court in Andrews also held that educational loans are not an exception to the automatic stay. Id. at 743. The court stated that the automatic stay to creditors of student loans stays in effect until "(1) the case is closed, (2) the case is dismissed, or (3) a discharge is granted or denied." Id.

In a similar case, a bankruptcy court held that although � 525 was not applicable, as the school that withheld the transcripts was not a state school, the school was in violation of � 362 for withholding the debtor's transcripts. In re Ware, 9 B.R. 24 (Bankr.W.D.Mo.1981).

Additionally, a bankruptcy court in the Northern District of Georgia, held that the University of Georgia's policy to withhold a debtor's transcript, in an effort to collect a loan, was a violation of the automatic stay provision of � 362 as well as a violation of � 525. In re Reese, 38 B.R. 681 (Bankr.N.D.Ga.1984). The court in Reese also found the university's argument, that the automatic stay had not been violated because the loan would be nondischargeable in the event Debtor were to fail to complete her Chapter 13 payments, to be without merit. Id. at 683. The court correctly reasoned that it found the university's argument, "unconvincing given the importance of Debtor's transcript to her endeavor to finding employment or to continue her education." Id..."