Business Law:
We can all agree that we never want to go through a bankruptcy. However, it is in all of our best interests to truly understand the bankruptcy law and process. For this assignment, I would like you to read the following case and answer the questions presented. This may require that you do some research on bankruptcy. Remember, any sources you use must be cited and I do not want you to copy answers from the internet. Think about the situation and apply your knowledge, gained from your readings, to the questions. One to two paragraphs for each question.
Jane Doe, a teacher, obtained a master’s degree at Somewhere University (names have been changed). But when Doe asked for a transcript—which was required to receive an increase in salary from her school district—the university refused because she owed more than $6,000 in tuition. Doe offered to pay the nominal transcript fee, but not the tuition. She then filed a petition in a federal bankruptcy court, listing the university as her only creditor, and while the case was pending, again asked for a transcript. The university again refused unless she paid the tuition. Doe complained to the court, which ordered the university to provide a transcript. A federal district court affirmed the order. The university appealed.
The U.S. Court of Appeals for the Seventh Circuit affirmed. Doe had a right to a copy of her transcript, and the university’s refusal to honor that right until she paid her tuition was an act to collect a debt, in violation of the automatic stay. Property interests are created and defined by the law. Nothing in the Bankruptcy Code or other federal law creates or affects property rights in grades or the right to a transcript. No state statute applies either, but under the state’s common law, property rights may arise from custom. In the state, universities have consistently provided certified transcripts at or around cost. This indicates that providing a transcript is an implied part of the “educational contract,” covered by the tuition and other fees. Because a transcript is part of the package of goods and services that a college offers in exchange for tuition, a student has a property right to a certified copy. In this case, Doe was willing to pay the cost. The university’s only reason for refusing to provide the transcript was to induce Doe to pay her unpaid tuition. But the automatic stay prohibits a creditor from acting to collect a claim against a debtor that arose before the filing of a bankruptcy petition.
What actions might a college take to collect unpaid tuition that would not violate the Bankruptcy Code?
Does the longstanding existence of a custom—in this case, the nominal amount of the fee charged by a college for a transcript—mean that it cannot change?
To avoid conflicts such as the one in this case, could a college charge a student a high fee for a transcript—for example, one that would equal the amount of any unpaid tuition?
Suppose that instead of offering to pay for a transcript, Doe had tried to obtain one on credit. Would the university’s refusal to provide one on that basis have led to the same result? Why or why not?
Some might say that higher education institutions should be able to use all methods possible to collect unpaid tuition, including withholding certified grade transcripts. What ethical issues would this approach raise?