In re Mu'Min

• Decision Date: 25 September 2007
• Docket Number: No. 06-12354ELF.,06-12354ELF.
• Citation: 374 B.R. 149
• Parties: In re Kameelah MU'MIN, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

374 B.R. 149

In re Kameelah MU'MIN, Debtor.

No. 06-12354ELF.

United States Bankruptcy Court, E.D. Pennsylvania.

September 25, 2007.

COPYRIGHT MATERIAL OMITTED

Jermaine D. Harris, Philadelphia, PA, for Debtor.

William C. Miller, Philadelphia, PA, for trustee.

OPINION

ERIC L. FRANK, Bankruptcy Judge.

I. INTRODUCTION

Presently before the court is the "Debtor's Motion for Contempt Pursuant to 11 U.S.C. § 362(k) of the Bankruptcy Code" ("the Motion") filed by Debtor Kameelah Mu'min ("the Debtor"). The respondent is the University of Pennsylvania ("Penn").

To decide the Motion, I must determine whether a university's refusal to provide a transcript to a debtor, due to the existence of an unpaid, student loan debt that is nondischargeable under 11 U.S.C. § 523(a)(8), violates the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a)(6).

For the reasons set forth below, I find that Penn has violated the automatic stay. Consequently, I will enter an order directing Penn to provide the Debtor with a certified copy of her college transcript upon payment of any customary fees. In addition, I hold that regardless whether the facts giving rise to Penn's asserted "good faith" would have constituted a defense to monetary liability under the standard set forth in by the Court of Appeals in In re University Medical Center, 973 F.2d 1065 (3d Cir.1992), after the 2005 amendments to the Bankruptcy Code, Penn's defense is no longer legally viable. Therefore, upon the filing of an appropriate motion, I will award the Debtor the actual damages that she has requested, namely, reasonable attorney's fees incurred for successful prosecution of the Motion.

II. PROCEDURAL HISTORY AND STATEMENT OF FACTS

A.

On December 15, 2006, the Debtor filed the Motion. (Docket Entry No. 49). Penn filed a response to the Motion on January 9, 2007. (Docket Entry No. 53). A hearing on the Motion was held and concluded on January 23, 2007. At the hearing, the parties submitted a written stipulation of facts. See Joint Exhibit # 1. In addition, the parties agreed to supplement the fact stipulation with four (4) exhibits, specifically certain letters exchanged by counsel for the parties between December 4, 2006 and December 11, 2006. See Notes of Testimony 22-24 ("hereinafter `N.T.'").¹ Following the hearing on January 23, 2007, I took the matter under advisement pending the submission of post-hearing memoranda from the parties. Both parties submitted memoranda.

The record reveals the following pertinent facts.²

B.

Between 1997 and 2001, the Debtor was a student at Penn.³ She financed her education, at least in part, through student loans granted or guaranteed by Penn. The principal amount of the loans was in excess of $33,000.⁴ The record does not reveal if or when the Debtor graduated Penn, but given her efforts to obtain a transcript for graduate school applications giving rise to this contested matter, it seems likely that the Debtor received an undergraduate degree, either from Penn or another institution. The Debtor became delinquent in the repayment of her Penn student loans on April 20, 2004. Her last payment on those loans was made on May 11, 2004. Her transcript has been "on official hold" since April 20, 2004. Joint Exhibit # 1 ¶¶ 10-11.

The Debtor first sought bankruptcy relief in a prior chapter 13 case filed on June 21, 2005 and docketed as Bky. No. 05-18584. The prior bankruptcy case was designed, in large part, to permit the Debtor to cure a mortgage delinquency and prevent a foreclosure against her residential property. The Debtor's plan was confirmed by Order dated January 24, 2006, but the case was dismissed on April 11, 2006 due to the Debtor's failure to make plan payments.

The Debtor filed the present chapter 13 bankruptcy case on June 6, 2006. Originally, she intended to make another effort to cure the prepetition mortgage delinquency on her home mortgage, see Debtor's Chapter 13 Plan ¶¶ 5-6 (Docket Entry No. 4), but she later changed course. Her Fifth Amended Chapter 13 Plan, which was confirmed by Order dated June 5, 2007 (Docket Entry No. 81), provides for the surrender of the Debtor's residential real property and for the Debtor to make thirty-six (36) monthly plan payments to the Chapter 13 Trustee totaling $8,650.00. Her plan payments are to be distributed on a pro rata basis to her unsecured creditors after payment of administrative expenses. See Fifth Amended Plan (Docket Entry No. 72).

In her bankruptcy schedules, the Debtor listed $96,034.69 in unsecured nonpriority debt. At the time the Motion was filed, unsecured claims totaling $66,783.15 had been filed, of which Penn's $59,302.99 claim was by far the largest.⁵ The Debtor concedes that her debt to Penn is nondischargeable. Joint Exhibit # 1 ¶ 5; see 11 U.S.C. § 523(a)(8).

C.

On October 3, 2006, several months after the filing of the present chapter bankruptcy case, the Debtor requested that Penn provide her with a certified copy of her transcript so that she could apply to a masters degree program in clinical psychology commencing in the fall of 2007. See Joint Exhibit # 1 ¶ 12. The Debtor's request was referred to counsel for Penn. See id. ¶ 13.

Thereafter, the Debtor's counsel corresponded with Penn's counsel in an effort to obtain the transcript. See id. ¶ 3; Joint Exhibit # 2.⁶ During a one week period between December 4 and 11, 2006, the Debtor's counsel sent three (3) letters to Penn's counsel. See Joint Exhibits # 2, # 3, and # 5. In these letters, one dated December 4, 2006 and two dated December 11, 2006, the Debtor's attorney:

• explained that the Debtor intended to apply to two graduate schools (Temple University and Chestnut Hill College);

• requested that Penn mail her college and graduate transcripts to the two graduate schools;

• communicated the Debtor's willingness to pay for the cost of the transcript;

• advised Penn's counsel that the Debtor "needs these transcripts mailed out to these institutions immediately" due to a December 15, 2006 "application deadline";⁷

• stated that a refusal to give the Debtor a copy of her transcript "solely due to her account delinquency" was a "direct violation of the automatic stay";

• confirmed his understanding that Penn "refuses to surrender [the Debtor's] transcript"; and

• advised Penn's counsel of the Debtor's intent to file a contempt petition seeking attorney's fees and a fine if Penn failed to make the transcript available by December 13, 2006.

There is no dispute that Penn did not provide the Debtor with a certified copy of her transcript in response to her request. Joint Exhibit # 1 ¶ 4. Penn has an official, written policy that student loan transcripts will not be released if there is a defaulted student loan, id. ¶ 7, at least "without payment or payment arrangement." Id. ¶ 6.⁸ In his letter in response to one of the Debtor's counsel's December 2006 letters, Penn's counsel stated that Penn's "policy [is] to put a transcript hold on accounts that are delinquent." However, he denied that Penn "attempted to collect a debt after being notified [that the Debtor] was in bankruptcy." See Joint Exhibit # 4.

III. DISCUSSION

A. The Automatic Stay — General Principles

The automatic stay under § 362(a) of the Bankruptcy Code "`is one of the fundamental debtor protections provided by the bankruptcy laws.'" H & H Beverage Distributors v. Dep't of Revenue, 850 F.2d 165, 166 (3d Cir.1988) (quoting H.R.Rep. No. 595 at 340 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6296). To provide the bankruptcy process with an opportunity "to resolve competing economic interests in an orderly and effective way," the automatic stay is designed to: (1) effectively stop all creditor collection efforts; (2) stop all harassment of a debtor seeking relief, and (3) maintain the status quo between the debtor and creditors. Taylor v. Slick, 178 F.3d 698, 702 (3d Cir.1999) (citation omitted).

To accomplish these goals, § 362(a) restrains a broad range of conduct, including the continuation of litigation,⁹ the enforcement of prepetition judgments,¹⁰ the creation or enforcement of liens against property of the estate¹¹ and, generally, any act to collect, assess, or recover a claim against the debtor that arose prepetition.¹² See generally Delpit v. Comm'r, Internal Revenue Service, 18 F.3d 768, 772 (9th Cir.1994) (observing existence of "substantial overlap" among the subsections of § 362(a) derived from Congress's intent to comprehensively describe every action "that might impinge on the debtor's `breathing spell,' even though such an approach might result in some redundancy").

Subsection (a)(6) provides that the filing of a petition operates to stay "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." 11 U.S.C. § 362(a)(6). This language has been described as "extremely broad in scope and encompass[ing] any act to collect a pre-petition claim from a debtor." Rosas v. Monroe County Tax Claim Bureau, 323 B.R. 893, 898 (Bankr.M.D.Pa. 2004). "Given the important functions served by the automatic stay, the provisions of subsection (a)(6) have been broadly construed." In re Sechuan City, Inc., 96 B.R. 37, 41 (Bankr.E.D.Pa.1989) (citing numerous cases).

Generally, the automatic stay continues to operate until the time a discharge is granted or denied, pursuant to 11 U.S.C. § 362(c)(2)(C). In this case, the automatic stay was in effect and applicable to Penn when the Debtor requested that Penn provide her with her college transcript.¹³

B. Brief Survey of the Relevant Caselaw

1.

The issue whether an educational institution¹⁴ violates the automatic stay by withholding a debtor's transcript due to the existence of an unpaid student loan debt is heavily chartered water. The majority view, occasionally with some qualification, is that a university's refusal to release a debtor's transcript due to the existence of a default on a...