The “Blonde” Version of Bankruptcy Verona M Lambert Director, Student Accounts Southeast Missouri State University

I am not an attorney, nor do I play one on TV!!! This presentation should only be viewed as a light-hearted discussion on bankruptcy and best practices from a specific higher education institution and should not be mistaken as legal advice to anyone in attendance of or reading the following documentation. Specific legal questions and/or application of these processes to your students/customers should be directed to your institutions legal counsel for advice on how you should proceed. I am not an attorney, nor do I play one on TV!!! This presentation should only be viewed as a light-hearted discussion on bankruptcy and best practices from a specific higher education institution and should not be mistaken as legal advice to anyone in attendance of or reading the following documentation. Specific legal questions and/or application of these processes to your students/customers should be directed to your institutions legal counsel for advice on how you should proceed.

Bankruptcy Chapters Chapter 7Discharge Bankruptcy Chapter 13Repayment Plan Bankruptcy

EXPLANATIONS (continued) PACER Subscription: Voice Case Information System (VCIS)

Bankruptcy Chapters 11 U.S. Code § Automatic stay Prohibits ANYONE from ALL collection activity of any or part of a debt during the course of the bankruptcy. Including co-signers! Get over it! RELEASE THE TRANSCRIPT!!!

Exceptions to Discharge 11 U.S.C. – Section 523 (8) Unless debtor can prove undue hardship: (A)(i) an educational benefit overpayment or loan made in whole or in part by a governmental unit or a nonprofit institution; (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or (B) any other qualified educational loan as defined in section 221(d)(1) of the Internal Revenue Code of 1986.

Definitions Internal Revenue Code – Section 221(d)(1) & (2) (1) Qualified education loan: Any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses. (2) Qualified higher education expenses: Cost of Attendance at an eligible educational institution

Cost of Attendance Section 472 of the HEA – 20 U.S.C Tuition/Fees normally assessed a student including materials and equipment for a specific course of study Books/Supplies/Miscellaneous

Undue Hardship Brunner vs NY Higher Ed Svcs Corp ( ) 3-part Brunner Test 1.Debtor would be unable to maintain minimal standard of living if paying debt. 2.Debtor’s financial situation is not expected to improve during the course of repayment period. 3.Debtor has made good-faith effort to repay the debt.

Chapter 13 File a Proof of Claim!  Send a full copy and self-addressed envelope in order to receive return receipt of document  Pay attention to deadlines  Be able to validate your claim/debt

FULL DISCLOSURE and TRANSPARENCY Higher Education Affordability Act  Signed Payment Documentation Student Financial Responsibilities: You are expected to attend all classes in which you are enrolled. If you do not attend or stop attending classes and fail to personally drop your class(es) by the deadline to drop with a partial refund, you will still be responsible for all fees charged to your student account at Southeast Missouri State University. You are responsible to pay all charges on your account by the payment due dates, even if you do not receive a billing statement or your account is being covered by another party. If you do not pay your account immediately at the time of registration, you understand you are entering into a student loan agreement with Southeast Missouri State University and that this agreement means that the charges on your record for the cost of attendance are non-dischargeable under 11 U.S.C. § 523(a)(8)(B) [of the U.S. Bankruptcy Code]. Furthermore, this agreement shall be governed and construed in accordance with the laws of the State of Missouri. ….. 

Example Letters

It has come to our attention that you filed a Chapter 7 bankruptcy, which was discharged on [date]. We are sending you this letter to inform you that while your bankruptcy discharged all dischargeable debts, the remaining money you owe Southeast Missouri State University is not a dischargeable debt. It was not automatically discharged as per the Bankruptcy Code: Section 523(a)(8)(B) of the Bankruptcy Code (as revised effective 10/17/05) excepts from discharge “any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986; incurred by a debtor who is an individual.” Section 221(d)(1) of the Internal Revenue Code defines “Qualified Education Loan” to mean “any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses...” The provisions of the Bankruptcy Code, which govern student loans, are self-executing. As a non-profit institution of higher education we were not required to request a hearing on dischargeability. All student loans and educational benefits are presumed to be non-dischargeable. If you believe you have successfully discharged this debt you must notify Southeast Missouri State University immediately and send proof to us. It is our position that you still owe these funds and have been returned to regular billing. Please contact us to set up a payment plan within 30 days of the date of this letter. If we do not hear from you, we will begin collections action up to and including any necessary litigation to collect this debt. We would prefer that you reaffirm your outstanding debt and begin repayment voluntarily. You have a balance of $xx.xx. We did not charge late fees on your account during the pending bankruptcy. However, as of the date of your discharge, late fees and interest will begin to accrue until the account is paid in full. It is imperative that you contact us at 573-xxx-xxxx as soon as possible or by return address at the address below. We will expect to hear from you within 30 days. Please find enclosed copies of your account information for reference. cc:Attorney Non-Dischargeable Debts After Discharge

Example Letters

It has come to our attention that you filed a Chapter 7 bankruptcy, which was closed XX. We are sending you this letter to inform you of your remaining balance due to the University. The remaining money you owe XYZ University is not a dischargeable debt since the notice stated your case was closed or dismissed without discharge. It is our position that you still owe these funds and have been returned to regular billing. Please contact us to make payment within 30 days of the date of this letter. If we do not hear from you, we will begin collections action up to and including any necessary litigation to collect this debt. We would prefer that you reaffirm your outstanding debt and begin repayment voluntarily. You have a balance of $XX. We did not charge late fees on your account during the pendency of your bankruptcy. However, as of the date of your dismissal, late fees and interest will begin to accrue until the account is paid in full. It is imperative that you contact us at 573-XXX-XXXX as soon as possible or by return address at the address below. We will expect to hear from you within 30 days. Please find enclosed copies of your account information for reference. cc:Attorney Case Closed – NO Discharge

It has come to our attention that you filed a Chapter 7 bankruptcy, which was discharged XX. We are sending you this letter to inform you that while your bankruptcy discharged all dischargeable debts, the remaining money you owe XYZ University is not a dischargeable debt. There is a remaining balance of $XX on your student account, which is comprised of XX that you XX after the date you filed for Chapter 7 bankruptcy (XX). You also have a current balance of $XX remaining on your Perkins Loan. The payments on your Perkins loan are scheduled to begin XX. We did not charge interest or late fees on your account during the pendency of your bankruptcy. Please pay your balance of $XX by XX. Feel free to contact the Student Financial Services Office if you have any questions regarding your account. cc:Attorney Non-Dischargeable--Debts Incurred After Filing

Questions?

Verona M Lambert Director, Student Accounts Student Financial Services Southeast Missouri State University