It is important to review your credit reports at least every six months to ensure that no incorrect information appears on the reports. For people who went through bankruptcy, the most common error involves creditors failing to update their reporting to indicate that the debt was discharged in bankruptcy and has $0 due.

These errors can be addressed a number of different ways, the most reliable one being through the provisions of the Fair Credit Reporting Act. The requirements for a dispute to be processed properly are very strict, but a failure on the part of the creditor to properly update the report once the errors is brought to its attention can result in a claim for a violation of the bankruptcy discharge, Fari Credit Reporting Act, and a variety of state laws.

The Debtor in the case was a student at Penn, financing her education through student loans granted or guaranteed by Penn. The principal amount of the loans was in excess of $33,000. The Debtor became delinquent in the repayment of her Penn student loans and has transcript was placed “on official hold.” Several months after the filing of her Chapter 13 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. The debtor’s request was referred to Penn’s lawyers, and a lengthy letter-writing campaign ensued.

The court sided with the majority of courts that hold a university’s refusal to release a debtor’s transcript due to the existence of a default on a nondischargeable student loan owed to the university violates the automatic stay.

For other cites holding this view, you may look to In re Merchant, 958 F.2d 738, 741 (6th Cir.1992) (holding that refusal to provide chapter 7 debtor transcript because of default on student loan was a violation of the automatic stay based on the plain language of 11 U.S.C. § 362); In re Hernandez, 2005 WL 1000059, at *1 (Bankr.S.D.Tex. Apr. 27, 2005) (concluding that denial of transcript to chapter 13 debtor because of outstanding student loans was a violation of the automatic stay); Loyola Univ. v. McClarty, 234 B.R. 387, 386 (E.D.La.1999) (university’s act of withholding chapter 13 debtor’s transcript violated automatic stay); In re Scroggins, 209 B.R. 727, 730 (Bankr.D.Ariz.1997) (act of parochial school withholding transcript of chapter 13 debtor’s minor child violated the automatic stay); In re Carson, 150 B.R. 228, 231 (Bankr.E.D.Mo.1993) (holding that college violated stay by not delivering transcript to chapter 7 debtor when debt had not yet been determined dischargeable); In re Gustafson, 111 B.R. 282, 288 (9th Cir.BAP1990), rev’d on other grounds, 934 F.2d 216 (9th Cir.1991) (holding that university violated the automatic stay by withholding chapter 7 debtor’s transcripts because the debts were not yet determined nondischargeable); In re Parham, 56 B.R. 531, 534 (Bankr.E.D.Va.1986) (holding that university violated automatic stay by withholding chapter 13 debtor’s student transcript, but that such action at bar did not rise to the level of contempt). See generally In re Parker, 334 B.R. 529, 536, 538 (Bankr.D.Mass.2005) (concluding that university’s act of refusing to allow chapter 7 debtor from registering for class and from graduation was both violation of the automatic stay and the discharge injunction); In re Walker, 336 B.R. 534, 536 (Bankr.M.D.Fla.2005) (considering whether private university violated 11 U.S.C. §§ 362 and 525 by withholding chapter 13 debtor’s transcript); In re Reese, 38 B.R. 681, 683 (Bankr.N.D.Ga.1984) (holding that state university violated 11 U.S.C. §§ 362 and 525 by withholding debtor’s transcript where debt was dischargeable); In re Ware, 9 B.R. 24, 25 (Bankr.W.D.Mo.1981) (on objection to confirmation found that 11 U.S.C. § 525 was inapplicable but that college violated automatic stay by denying transcript to chapter 13 debtor); In re Howren, 10 B.R. 303, 305 (Bankr.D.Kan.1980) (on motion requesting order for immediate release of transcript, held that state university was in violation of 11 U.S.C. §§ 362 and 525 for withholding chapter 7 debtor’s official transcript for purpose of debt collection); In re Heath, 3 B.R. 351, 354-55 (Bankr.N.D.Ill.1980) (state university act of refusing to issue academic record to chapter 13 debtor frustrated fresh start policies of the Bankruptcy Code and violated both 11 U.S.C. §§ 362 and 525).

The case arose when M&M Auto Outlet-Wyoming, Inc. repossessed the debtor’s pickup truck after a Chapter 13 bankruptcy petition had been filed.

The court held that in order to demonstrate a violation of an automatic stay of 11 U.S.C. 362(k)(1) the debtor bears the burden of establishing, by a preponderance of the evidence, that the creditor knew of the automatic stay and intended the actions that constituted the violation; no specific intent is required.

In other words, all that need be proven is that the creditor knew of the bankruptcy and acted in the face of it. The debtor need not prove that there was an intent to violate the automatic stay, merely that there was an intent to take the act. Period. End of story.

The Court in Sanchez held that post-petition, pre-confirmation attorney fees, costs and property inspection fees charged by the mortgage servicer had to be regarded as per se unreasonable, where the servicer, by failing to disclose that it was charging such fees pursuant to terms of mortgage documents, and by simply applying payments that it received from trustee to these undisclosed charges, acted in manner antithetical to spirit of the Bankruptcy Code, and deprived the court of the opportunity to assess reasonableness of charges as required by § 506(b).

This decision is, in my opinion, a pretty good one because it not only lays out the fact that a mortgage servicer must disclose all post-petition fees and obtain approval from the bankruptcy court pursuant to Rule 2016, but also that the Court looks to the argument that the protections of Section 1322(b)(2), which allows a mortgage creditor to “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims,” allows the servicer to do an end run around § 506(b) as well as Rule 2016.

In rejecting this argument, the Court notes that Section 1322(b)(2) does not give the holders of secured homestead interests carte blanche to charge any fees that follow the letter of the contract. In addressing this issue, the Court notes:

It is not difficult to harmonize § 506(b) and Rule 2016 with § 1322(b)(2), and the Defendant has not provided any case law to the contrary. Requiring a creditor to file a Rule 2016 application with the bankruptcy court in order to collect fees from the estate does not modify that creditor’s right to collect those fees. Similarly, requiring a creditor to affirmatively demonstrate that its fees are reasonable does not modify that creditor’s right to collect such fees. Creditors have a panoply of contractual rights under § 1322(b)(2), but the right to charge unreasonable fees has never been among them. Thus, the Defendant’s rights to collect fees pursuant to § 1322(b)(2) are not modified by having to file a Rule 2016 application with the Court, nor by having to make an affirmative showing that its fees are reasonable under § 506(b).

As I continue to advocate for my clients on issues such as these, I am pleased to see that courts around the country are beginning to see the mortgage servicing industry for what it is rather than as the benevolent entities that are looking out to help their customers and comply with the law.