SECTION 11: Bankruptcy Procedures

Departments throughout the University may receive bankruptcy notices which list Michigan State University as a creditor.  These notices are legal documents which prohibit the University from pursuing collection of outstanding obligations while the account is in bankruptcy.

Upon receipt of a bankruptcy notice, departments must cease collection activity by law on the account in question (for debts incurred prior to the date of filing bankruptcy) and forward the bankruptcy notice to the:

Please note the department forwarding the notice and whether any debts are covered by the bankruptcy action.  If you have questions regarding a bankruptcy, please contact 355-3313.

Notices must always be forwarded to the Controller's Office, regardless if the department receiving notice of bankruptcy has an outstanding receivable balance with the debtor or not.  Other departments throughout the University may also have business pending with the debtor and must be notified of the bankruptcy status.

Upon receipt in the Controller's Office, a notice is circulated to various offices around campus which typically deal with receivable accounts and who may be maintaining a collection account with the debtor.  Departments wishing to be included in the routing on a regular basis should contact the Controller's Office at 355-3313.

If a department receives correspondence from the Controller's Office requesting information on outstanding debts involved in a bankruptcy, the department should complete and return requested information, with supporting documents, within 48 hours of receipt.  The Controller's Office will consolidate information from the University as a whole and prepare and file a claim on a timely basis.

Failure to file a claim with the court by the deadline generally prohibits the University from further pursuit of any part of the debt.

Departments which utilize outside collection agencies should notify the agency that upon receipt of a notice of bankruptcy, the agency is required to close and return the account to the University immediately.  Under no circumstances should an outside agency file a bankruptcy claim on behalf of the University.

Upon receipt of a bankruptcy discharge or dismissal, departments involved will be notified by the Controller's Office.  A dismissal allows the department to resume collection of any debt outstanding.  A Chapter 7 discharge will typically require any department involved to write off any debts outstanding and to cease collection activity on any debts incurred up until the debtor filed for bankruptcy.

An exception to the discharge rules involves obligations to repay funds received as an educational benefit, scholarship or stipend (including student loans).  (Effective for bankruptcies filed on or after May 28, 1991.)

Please be aware that a bankruptcy action frequently takes many months to be finalized and that a Chapter 13 Bankruptcy may take several years to complete.