Pete Bastianen's last post did a great job of explaining when the automatic stay is limited to thirty days and when it is terminated in its entirety. But, when the automatic stay is in effect, does a violation require an affirmative act, or can the automatic stay be violated by failing to act at all?
A recent case out of the 7th Circuit says that a creditor can violate the automatic stay by failing to act. In Re Kuehn, 563 F.3d 289 (2009), concerned a student enrolled at a two-year master's degree program at Cardinal Stritch University. The student fell behind nearly $6,000 on her tuition, but was still allowed to complete her classes and graduate. After graduation, the student requested a copy of her transcripts from the school. The school did not provide the transcript, presumably in an attempt to get paid. Then, the student filed bankruptcy. After filing, the student again requested the transcripts and was again denied.
In ruling that the school's refusal to provide the transcript violated the automatic stay, the court applied the "coercive effects" test, which says that a creditor acts to collect a debt if it acts or fails to act in a coercive manner with the sole purpose of collecting a debt. Because the transcript had no intrinsic value to the university, and was essentially worth only as much as the paper on which it was printed (or less), the university was being coercive by withholding it from the student.
A recent case out of the 7th Circuit says that a creditor can violate the automatic stay by failing to act. In Re Kuehn, 563 F.3d 289 (2009), concerned a student enrolled at a two-year master's degree program at Cardinal Stritch University. The student fell behind nearly $6,000 on her tuition, but was still allowed to complete her classes and graduate. After graduation, the student requested a copy of her transcripts from the school. The school did not provide the transcript, presumably in an attempt to get paid. Then, the student filed bankruptcy. After filing, the student again requested the transcripts and was again denied.
In ruling that the school's refusal to provide the transcript violated the automatic stay, the court applied the "coercive effects" test, which says that a creditor acts to collect a debt if it acts or fails to act in a coercive manner with the sole purpose of collecting a debt. Because the transcript had no intrinsic value to the university, and was essentially worth only as much as the paper on which it was printed (or less), the university was being coercive by withholding it from the student.
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