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U.S. Bankruptcy Code Sec. 523
If the College receives notice, as a creditor, that a student has
filed for bankruptcy, then:
- Note in student's record and financial aid file that a bankruptcy
petition is pending. In the interim, follow the procedures
set forth in the following paragraphs 3.a.1) and 3.a.2).
- File with the court a claim indicating the amount of the student
debt to the College, with supporting financial records (i.e.,
registration form(s), signed deferred payment agreement(s), and
accounts receivable record showing any payments made with balance
owing). Also, state that the College claims this debt is
not dischargeable under 11 USC §523 (a) (8). An example
of the claim form is included for your information (Exhibit A).
Blank "Proof of Claim" forms are available at each respective
U.S. Bankruptcy Court.
- If the bankruptcy court specifically grants discharge of the
student debt, then the Region should follow the steps described
below (a.1) a.2) and b.), and forward a copy of each court order
to the College General Counsel. A general order of discharge
does not discharge a student loan.
- Make an entry in the student's records and financial aid
file of the date of bankruptcy decree, and note that future
efforts to collect the debt which violate federal law should
not be made, such as:
- Withholding transcripts or other acts designed to compel
the debtor to pay the discharged debt (11 USC §524
a(2), and
- The College is forbidden from discrimination against
bankrupt persons solely on the basis of bankruptcy (11
USC §525).
- Include the student debt on the next accounts receivable
write-off report.
- If the debt is not specifically discharged by court order,
the College is free to pursue collection of the debt against the
student, including withholding grades, transcripts, diplomas,
admission, etc. Another entry, as a follow-up to 3.a. above,
should be made, noting that the debt is a valid one to be pursued.
(Refer to SIS B/R Users Manual for system-required entries).
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