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.
Bankruptcy Chapters
Chapter 7
Discharge Bankruptcy
Chapter 13
Repayment Plan Bankruptcy
EXPLANATIONS (continued)
PACER Subscription:
http://pacer.psc.uscourts.gov
Voice Case Information System (VCIS)
https://www.pacer.gov/phone_access.html
1-866-222-8029
Bankruptcy Chapters
11 U.S. Code § 362 - 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. 108711
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 (87-5013)
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!
http://www.wiwb.uscourts.gov/fillable_forms/ProofofClaim_B10.pdf
 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. …..

http://www.semo.edu/sfs/SFS_Student_Financial_Responsibilities.pdf
Example Letters
Non-Dischargeable Debts After Discharge
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
Example Letters
Case Closed – NO Discharge
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
Non-Dischargeable--Debts Incurred After Filing
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
Questions?
Verona M Lambert
Director, Student Accounts
Student Financial Services
Southeast Missouri State University