Discharging Tuition Debt In Chapter 7!
Can tuition debt be discharged in Chapter 7?
As most people are aware you generally cannot discharge student loans in a bankruptcy. For tuition debt it is a fact specific inquiry on whether the tuition debt is dishargeable. According to case law and 11 USC 523 (a) (8) the dischargeabily turns on whether the tuition debt is a loan or an overpayment of an educational benefit that is non dischargeable.
If the Debtor enrolls in classes and merely fails to pay tuition debt then generally the debt may be discharged. However, if the Debtor signs some type of promissory note or makes a promise to pay then the debt could be non-dischargeable. The issue of whether the tuition debt is a loan is a fact specific inquiry and depends on what the person signed when they signed up for your classes or in most cases after. If the school does not challenge the discharge in a Chapter 7 the tuition debt will likely be discharged.
One thing is generally clear however, is that the Debtor can get their transcript if they owe tuition debt once the automatic stay is in effect by filing a Chapter 7 or a Chapter 13 bankruptcy. In most cases, the withholding of the transcript is a violation of both the discharge injunction and the automatic stay.
AUTHOR: Marc Wagman
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.