Recent Entries

Are Your Tuition Receivables Nondischargable in Bankruptcy

KCSBy Keri Ebeck, Partner

If a student attends classes, later fails to pay the tuition and then files bankruptcy to discharge the tuition debt, is that debt nondischargeable as a student loan under 11 U.S.C. §523(a)(8)?  it depends on whether or not the tuition is considered a loan

Some areas follow the Chambers test and some follow the Grand Union standard.  The Chambers[1] case is from the Seventh Circuit and requires either that funds change hands from the school, as a lender, to debtor, as a borrower or that educational services are transferred contemporaneously with or prior to an agreement to pay the tuition later.   What this means is that the school must actually give tuition funds directly to the debtor in exchange for an agreement to pay later, or there must be a loan agreement between the school and the student where the student agrees to repay the tuition.  If there is only a loan agreement and no transfer of funds, the loan agreement must be made before or at the same time that the student attends the classes that the tuition loan is intended for.

Other areas follow the Second Circuit’s Grand Union[2] standard.  This looks at the intent of the parties as expressed in a loan agreement.   To be a loan, an agreement must have these elements:   “(i) a contract, whereby (ii) one party transfers a defined quantity of money, goods or services, to another, and (iii) the other party agrees to pay for the sum or items transferred at a later date. This definition implies that the contract to transfer items in return for payment later must be reached prior to or contemporaneous with the transfer”. [3]  This means that an agreement that defines the amount of tuition owed and the terms of later repayment must be reached before the student attends classes.

Both standards require some form of loan agreement.  What the cases unanimously say is that allowing a student to attend classes without a repayment agreement does not qualify as a loan in retrospect, and so the unpaid tuition receivables will be dischargeable in bankruptcy.  If you have tuition receivables, it would be wise to review your policies and agreements to ensure that those who attend classes without paying beforehand will not be able to discharge their tuition in bankruptcy.

[1] In re Chambers, 348 F.3d 650 (7th Cir. 2003)
[2] Cazenovia College v. Renshaw (In re Renshaw), 222 F.3d 82 (2d Cir. N.Y. 2000)
[3] Id., at 88

Obligations of Mortgage Creditors after Relief from Stay

JMCBy Joseph McCandlish, Attorney

So, the debtor proposed paying the pre-petition arrearage on your mortgage through the plan. Regular post-petition payments would come from the debtor directly. But, those payments stopped. You then obtained relief from the automatic stay. Now you can foreclose. But you may not be finished with your obligations pursuant to the bankruptcy rules.

At least one court has held that in the above scenario, the mortgage creditor must still file notices of payment change, at least so long as the debtor retains title to the property. [1] This is so even when the plan provides that if relief from stay is granted, “no further distributions shall be made to the Creditor until such time as an amended claim for any deficiency is filed and allowed.”[2]

Not all courts may rule the same way. Also, a small factual difference may change the outcome. For example, where a mortgage creditor obtained relief from stay and withdrew its proof of claim, one court found that the mortgage creditor would no longer need to file notices of payment change. [3]

For questions regarding the above, or regarding the other obligations Rule 3002.1 imposes on mortgage creditors, feel free to contact me at, or (614) 801-2619.[4]

[1] In re: Holman, 2013 Bankr. LEXIS 981 (E.D. KY. Nov. 15, 2013).
[2] Id. at *3.
[3] ­In re: Thonga, 480 B.R. 317 (Bankr. E.D. Wis. 2012).
[4] (See Fed. R. Bankr. Pro. 3002.1)

Bankruptcy Forms to Change December 1st

KCSBy Keri P. EbeckPartner

As of December 1, 2015, the United States Bankruptcy Courts will mandate usage and filing of the forms approved at the Judicial Conference in September 2015. Although many of the official bankruptcy forms will change, those effecting lenders and creditors directly include: proof of claims, mortgage attachment (also known as 410A form), notice of payment change, notice of post petition expenses and the reaffirmation agreement cover page.

Lenders and creditors should be aware that after December 1, 2015, the old forms will not be accepted and the Courts will require usage of the new forms. Most importantly is that creditors, prior to December 1, 2015 should review the new forms and their requirements, which can be found at The new proof of claim and the mortgage attachment (Form 410A) have significant changes and require substantially more information to complete as compared to the old forms, and therefore, prior review is recommended.

Upon review of the new forms, if there are specific questions or concerns with completing the new forms, creditors should seek the advice of counsel to discuss.

If you have any questions, please contact Keri P. Ebeck, Esq. Keri practices in Bankruptcy and is located in the Pittsburgh office. She can be reached at 412.338.7102 and

Filing Motions of Sanctions by Debtors

JJLBy Jon Lieberman, Attorney

The filing of motions for sanctions by debtors, for alleged creditor stay violations seems to have increased in volume as of late. Michigan creditor counsel have successfully used two recent Sixth Circuit cases to reiterate the duty of debtors and/or their counsel to mitigate their damages before seeking sanctions for such alleged violations.

In Schang v. Muller, Muller, Richmond, Harms & Myers, P.C., 2015 WL 3441178 (E.D. Mi. 2015), the Court ruled that the Debtor has a duty to mitigate harm before seeking sanctions for creditor’s violation of stay. Three days after debtor filed for bankruptcy protection, creditor (without knowledge of case) sent collection letter. Debtor and Debtor’s counsel made no effort to contact creditor or creditor’s counsel to advise of bankruptcy filing. One month later, creditor issued second collection letter and debtor sought sanctions. Debtor could have taken minimal steps after receiving first letter that likely would have prevented second letter. Debtor’s failure to take simple steps that would have caused creditor to cease collection efforts constituted failure to mitigate. Request for sanctions denied.

In In re Phillips, 2015 WL 4256641 (Bankr. E.D. Tn. 2015), creditor violated the stay by contacting debtor and relatives of debtor 22 times post-petition before ceasing efforts. However, at no time did debtor advise creditor of bankruptcy filing until debtor filed motion for sanctions, at which point creditor immediately ceased collection efforts. Debtor’s counsel intentionally mailed creditor a blank sheet of paper by certified mail to confirm address was correct on prior notices, but did not make any effort in that mailing or in response to a phone call from creditor (in response to the blank sheet of paper) to advise creditor of bankruptcy. Sanctions must be proximately caused by violation of stay. If litigation is unnecessary to afford debtor a complete remedy, then fees for commencing and prosecuting action are not compensable.

Creditors: Be Aware of Important Changes on the Horizon for Bankruptcy Forms

JMCBy: Joseph McCandlish, Attorney

The forms for proofs of claim are changing again in December of 2015. As you might expect (rather than as you might hope), substantially more detail will be required. This is especially so for mortgage proofs of claim.

The good news is that there is an official two-page instruction form for the proof of claim, and an official three-page instruction form for the mortgage attachment. As indicated by the proposed forms, additional detail should be listed, for each payment received. I have included a link to this article. [1]

Again, we anticipate that the forms will be approved for use beginning December, 2015. We recommend meeting with your bankruptcy attorney ahead of time, rather than figuring out how to produce the additional information while under the pressure of a deadline that is approaching.

To schedule a time to meet, or if you have any questions about the new forms, feel free to contact me here.


[1] Source:, “Pending Official Bankruptcy Forms and Committee Notes”, pages 241-245