In a November 17, 2005 decision, the US Bankruptcy Court in Boston found that Boston University violated the automatic stay of the Bankruptcy Code when it refused to permit a bankruptcy debtor to register for classes because the debtor owed money to BU.
The case involved a debtor who enrolled at BU in the autumn of 1999. While she received substantial financial aid during her first three years, she did not receive any aid for her senior year which was spent entirety in the African country of Niger. The costs of tuition and her air fare to Niger were paid for by BU. During that fall semester, BU sent three notices to debtor and her family but was nevertheless allowed to return to Niger in the spring because the tuition and costs had already been paid in full.
Upon her return, the debtor had one class to complete but as this class was offered only during the spring semester, she applied for and was permitted a leave of absence for the fall 2003 semester. When she attempted to register for the spring 2004 class, she was told she had to pay $38,195 then owing for her tuition and costs for the 2002-2003 academic year. Unable to come up with such a large amount of money, she applied for another leave of absence to the spring of 2005 when the course would be taught again. In the meantime, she tried to resolve the tuition issue with BU but was unsuccessful. On December 14, 2004, she filed bankruptcy under Chapter 7, listing the obligation to BU as an unsecured claim.
After filing the bankruptcy petition, she attempted to register again for her final course. BU refused. Even though she was refused, she made arrangements with the professor to attend classes, and complete tests and assignments during that Spring 2005 semester, with the hope of being allowed to register once she received her bankruptcy discharge. The discharge was received on March 28, 2005.
On March 30, 2005, the debtor filed a complaint seeking (1) a determination of whether the debt to BU was in fact dischargeable; (2) an injunction barring BU from taking any action to enforce the debt; and (3) damages, attorney’s fees and punitive damages for violating the Automatic Stay.
The first issue was easily resolved as BU did not contest the dischargeability of the debt.
On the second issue, BU admitted refusing debtor’s registration, but claimed that it was contemplating bringing an action in the Bankruptcy Court to determine the dischargeability of the debt…..even though it never did. After analyzing the case law from this and other jurisdictions, the Court rejected BU’s arguments: “BU cannot reasonably argue that the act of not allowing Debtor to register for a class and for graduation was done for any purpose other than to compel Debtor to pay her debt.” With that said, the Court found that BU violated the automatic stay of the Bankruptcy Code.
As for damages, that issue has not been resolved. An evidentiary hearing has been set for March 26, 2006.
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- The US Supreme Court Rules in United Student Aid Funds, Inc. v. Espinosa
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Tags: Adversary Proceedings, Automatic Stay, Boston University, discharge, Discharge of Debts