If your school is refusing to release your college transcripts because you have not paid your student loans, you may be able to get those transcripts by filing for bankruptcy.
Withholding Transcripts as a Collection Tool
In many areas, schools cooperate with student loan lenders by denying borrowers access to official college transcripts when their student loans are in default. In fact, the Department of Education encourages schools to withhold official transcripts when student loans are not being paid, and some states, such as Florida, have laws which specifically allow state schools to withhold official transcripts when student loans are in default. These efforts are designed to encourage repayment of the delinquent loans. (Learn more about your options for getting out of default on student loans.)
Bankruptcy's Automatic Stay Prohibits Collection Actions
With very limited exceptions, when you file for bankruptcy, a temporary injunction (an order prohibiting certain conduct) goes into effect automatically. This injunction, called the automatic stay, prohibits creditors from taking any action to collect a debt that was incurred before you filed for bankruptcy. (Learn more about bankruptcy's automatic stay.)
Most courts that have considered the issue have found that withholding official transcripts from a bankruptcy debtor because of unpaid or delinquent student loans that are listed in the bankruptcy schedules is an act to collect a debt, and that the automatic stay applies. In those courts, if you file for bankruptcy, the school can no longer refuse to give you your college transcripts.
Debts Need Not Be Eligible for Discharge
Student loans are not dischargeable in bankruptcy unless you can prove that to pay them would cause you "undue hardship." (Learn more about discharging student loans in bankruptcy.) But according to most courts, schools cannot withhold your official transcripts while the automatic stay is in effect, whether or not the student loan debt will be discharged.
But the automatic stay doesn’t last forever, and unless you payoff everything you owe in the bankruptcy or the student loan debt is discharged, the school will be able to withhold your official transcripts again when the stay ends.
How Long Does the Automatic Stay Last?
Absent a court order terminating the automatic stay, it remains in effect until you receive a discharge or until your case is dismissed. The time period differs depending on whether you file under Chapter 7 or Chapter 13.
Chapter 7. If you file for Chapter 7 bankruptcy, you need to act fast because the automatic stay as applied to you, is short. Chapter 7 is a liquidation bankruptcy where you surrender all non-exempt assets to the trustee. You generally receive your discharge within 90 to 120 days after filing. So if you file for Chapter 7 and need to get
your official transcripts, you need to request them in the short time period between the date that you file for bankruptcy and the date you receive your discharge.
Chapter 13. Filing for Chapter 13 bankruptcy will give you more time. Chapter 13 is a court approved repayment plan. You don’t receive a discharge until you complete your approved Chapter 13 plan. This generally takes three to five years, which should give you plenty of time to obtain your official transcripts