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Federal Student Fund Bankruptcy Collection Process

Learn about the implications of bankruptcy on federal student funds, debt collection procedures, and debt discharge guidelines for universities.

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Federal Student Fund Bankruptcy Collection Process

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  1. Bankruptcy Issues • If a student receives Federal Funds in error, funds are pulled back. The University has to return the funds to the federal government (lender) and an accounts receivable is established between the student and the University. • When the University receives notification of Chapter 13 bankruptcy, the Proof of Claim for the debt owed is completed and submitted. • Once the bankruptcy is discharged, collection is resumed unless the debt was discharged by the courts. • Regardless of whether the debt was discharged by bankruptcy or not, only accounts receivable less than $3,000.00 can be written-off with approval from SAO. • Other Debts – Emergency Loans, Alternative Payments, Promise to Pay, etc.

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