As most people are already aware, student loans are generally not dischargeable in either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy (for more information about the dischargeability of student loans in bankruptcy, please see our prior article entitled
STUDENT LOANS, BANKRUPTCY, AND THE "HARDSHIP DISCHARGE").
But what about unpaid tuition bills?
Generally, the answer on whether an unpaid tuition bill or other college charges will be dischargeable or non-dischargeable in a Chapter 7 or Chapter 13 bankruptcy depends upon whether the Debtor (person who files for bankruptcy) signed a promissory note (an agreement signed on or about the same time providing for a definitive amount to be repaid, in specified installments, by a certain time, and at a certain interest rate) with the college or other institution.
If the Debtor did not sign a promissory note, the tuition bill or other college charges will likely be dischargeable in bankruptcy. The key issue is whether the unpaid tuition bill is considered a (educational) loan, or whether it is just a contractual obligation. If it is considered a (educational) loan, then it will likely be a non-dischargeable debt pursuant to 11 USC 523(a)(8) of the US Bankruptcy Code, and numerous courts have held that a tuition bill for which a Debtor has executed a promissory note is evidence that the debt is a (educational) loan.
However, in the absence of a promissory note or other evidence that the debt is in fact a (educational) loan, courts have held that a tuition bill is a contractual obligation which can be discharged in a Chapter 7 or Chapter 13 bankruptcy.
If you have an unpaid tuition bill, you are probably also finding out that your college is refusing to provide you with a copy of your academic transcripts. Note that while they can do this outside of bankruptcy, once a bankruptcy is filed, colleges can no longer withhold your transcripts. The withholding of a college transcript because of an outstanding tuition bill has been determined by the courts to be a collection activity in violation of bankruptcy's Automatic Stay, which applies to both a Chapter 7 bankruptcy and Chapter 13 bankruptcy. Additionally, once the debt has been discharged through a bankruptcy, a college cannot refuse to provide you with a copy of your academic transcripts.