Court Opinion

ID: 9701399
Source: CourtListenerOpinion
Date Created: 2023-08-25 22:18:25.27765+00
Date Added: 2024-06-11T18:21:23.524111
License: Public Domain

RUSSELL, Bankruptcy Judge,
dissenting:
I respectfully dissent. I disagree with the majority’s discussion entitled “Withholding Transcripts as a Violation of Section 362(a)(6)” which in effect concludes that upon request by a debtor, a university must turn over the debtor’s transcripts or risk sanctions for violating Section 362. This conclusion would turn the law on its head.
I. Merely withholding the transcripts was not a violation of the Automatic Stay.
The question is whether the university violated the automatic stay by withholding the debtor’s transcripts. Withholding of transcripts has been established in this circuit as a proper method of debt collection outside of bankruptcy. See Juras v. Aman Collection Serv. Inc., 829 F.2d 739 (9th Cir.1987), reh’g. denied, — U.S. -, 109 S.Ct. 523, 102 L.Ed.2d 556 (1988) (university can withhold, as transcripts are not property of the debtor, and thus do not constitute “security”).
Although the majority opinion accurately quotes the Juras opinion, the holding in Juras was that the following statement of the university was false and misleading as a matter of law: “[I]f you make a decision to try to discharge this debt in bankruptcy, and if you are successful, transcripts would still not be made available to you ... To capsulize, I would have to say that my authority is based on Federal law.” Id. at 743-44. In effect the Ninth Circuit held that if it is determined that the debt is discharged, then the university would be required to turn over the transcript.
Furthermore, Juras endorsed the analysis in Johnson v. Edinboro State College, 728 F.2d 163 (3d Cir.1984), in stating that a university has the right to withhold transcripts if “arrangements to repay the loan or discharge the debt are lacking.” Juras, 829 F.2d at 743. Clearly in this Chapter 7 case the debtor has made no arrangements to repay the loan or discharge the debt.
As student loans are presumptively non-dischargeable in Chapter 7 until determined otherwise by the court, and as no such determination was sought in this case, Section 362 does not prohibit the university’s refusal to turn over the transcripts. See Johnson, 728 F.2d at 165.1
In Johnson, the bankruptcy court determined that the debtor’s educational loans were nondischargeable, but ordered the college to give the debtor a diploma and a copy of his transcripts. The District Court affirmed. The Third Circuit reversed and distinguished the Chapter 13 cases.2 The Court succinctly stated the issue and its conclusion in the opening lines of its opinion:
In this appeal, we are asked to decide whether the Bankruptcy Code prohibits a state college from retaining the tran*290script of a debtor whose educational loans were not dischargeable in a Chapter 7 proceeding. We hold that it does not.
Id. at 167.
To hold otherwise would produce an extremely unusual and unfair result. I assume that the majority would agree that after a court actually determines the debt is nondischargeable, that the university would not be in violation of Section 362 in refusing to turn over the transcripts. If a debtor feels that his student loan is dis-chargeable he may file a complaint to determine the dischargeability of the debt, and if he prevails, the university must turn over the transcripts.
In this case by holding that the mere refusal to turn over the transcripts is a violation of Section 362, the majority denies the university its day in court. If it turns over the transcripts, it has lost, and if it refuses, it is in violation of Section 362 and the presumption of nondischargeability is meaningless as to its ability to refuse to turn over the transcripts. It is clear to me that the university must not be put to such a Hobson’s choice until the court has actually determined the dischargeability of the debt.
This situation is similar to the dilemma in which a bank finds itself concerning protecting its setoff rights under 11 U.S.C. Section 553 by putting an “administrative freeze” on the debtors checking account. If it complies with the debtors demand for the funds, the money may be dissipated without adequate protection for the bank. If the bank refuses to turn over the funds, it may face sanctions for a violation of the automatic stay. The Bankruptcy Appellate Panel, in In re Edgins, 36 B.R. 480 (9th Cir. BAP 1984), appropriately held that the “administrative freeze” is proper and it is the debtor’s obligation to initiate a proceeding to determine the proper disposition of the account funds after a bank has placed an “administrative freeze” on the account.
II. No affirmative act by the university violated Section 362(a)(6).
Section 362(a)(6) does not provide a bar to the university’s withholding of the transcripts. As previously stated, the automatic stay cannot be construed so as to require affirmative action on a presumptively non-dischargeable debt. The debtor had no right to the transcripts and should not be afforded them under Section 362. Only upon a finding of dischargeability would the university be required to deliver the transcripts to the debtor. See Johnson, 728 F.2d at 164.
In Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81 (3rd Cir.1988), the Third Circuit held that as a matter of law, a credit union did not violate Section 362(a)(6) by sending an unsolicited letter advising the debtor that unless she reaffirmed her credit union debt, the credit union would refuse all future services to her.
In Brown, the debtor filed a Chapter 7 petition on May 1, 1984. On May 3, her attorney wrote the credit union informing it of the bankruptcy and that “all collection efforts ... should cease immediately.” On June 5, 1984, the credit union sent a letter directly to Brown, without a copy being sent to her attorney. The letter read in part:
It is the Credit Union’s policy to deny future services to members when any portion of the debt is discharged in bankruptcy. However, if the obligation is reaffirmed with court approval, you would remain eligible for services as though the bankruptcy had not occurred.
CSUF’s position is far stronger than that of the credit union in Brown, in that all of the university’s actions were merely in direct response to the unwarranted demands of the debtor. In fact, the university’s response that it would not release the transcripts until the debtor received his discharge was extremely reasonable, because as previously discussed, it was well within its rights to refuse to turn over the transcripts at least until a court declared the debt to be dischargeable.
CONCLUSION
The withholding by CSUF of the debtor’s transcripts, where the debtor’s student *291loan to CSUF was presumed to be nondis-chargeable pursuant to 11 U.S.C. Section 523(a)(8), was not a violation of Section 362(a)(6). Therefore, I would reverse the imposition of sanctions of $312.50 against CSUF.

. The present case does not contradict the holdings of the Chapter 13 cases which have found a violation of 11 U.S.C. Sections 525 and/or 362. Under Chapter 13, student loans are not presumptively nondischargeable. See In re Reese, 38 B.R. 681 (Bankr.N.D.Ga.1984) (transcript withholding in Chapter 13 prior to discharge was a violation of Sections 362(a)(6) and 525); In re Ware, 9 B.R. 24 (Bankr.W.D.Mo.1981) (motion to compel turnover granted in Chapter 13 prior to discharge based on Section 525 and Section 362(a)(6) violations). In re Howren, 10 B.R. 303 (Bankr.D.Kan.1980) is contrary to my view. However, Howren based its holding on Chapter 13 cases only and did not address the effects of the differences in the presumption of nondischargeability. Howren was also specifically rejected by the Third Circuit in Johnson, 728 F.2d at 166 n. 5.

. Although the Chapter 13 cases can easily be distinguished, there is a serious question as to whether even a Chapter 13 debtor is entitled to the transcripts until the discharge is actually entered under § 1328(a) and the student loan is actually discharged. Because of a Chapter 13 debtor's absolute right to dismiss the case under 11 U.S.C. Section 1307, a debtor could file a Chapter 13 case and demand the transcripts from a university. If the university must promptly comply with the request, after receiving the transcripts the debtor may then immediately dismiss his case without having filed a plan or having made a single plan payment. This would hardly be a just result.