Proxifile Advises That People Ignore Bankruptcy Court Notices at Their Peril

Filing for bankruptcy is a process. Debtors need to understand that every action in the process has a reaction—including receiving notices from the bankruptcy court updating the debtor on the status of their bankruptcy as well as notices that request a response from the debtor.

A student loan servicer recently learned this the hard way. In addition to being unable to collect the nearly $417,000 it originally claimed to be owed, the student loan servicer was fined an additional $378,000 by the bankruptcy court for failing to understand the implications of bankruptcy law.

The trouble for the loan servicer began when an individual who’d borrowed nearly $300,000 to finance his children’s education. Then he filed for a chapter 7 bankruptcy on his own. As was required, the individual filing bankruptcy sent notice of the proceeding to the Department Of Education, which was the holder of the student loans at the time. By the time the court case was filed, the lender demanded that the borrower pay a total of $416,877.56 for unpaid principal, accrued interest, and collection costs. Again, he ignored a notice from the court.

The court declared the student loans to be discharged through the issuance of a default judgment against the student loan holder and its servicer.

The student loan servicer then proceeded to ignore the issuance of the student loan debt discharged by the court.  Instead, they sought to collect on the discharged loans, including threatening to garnish the wages of the former debtor. The bankruptcy court, none too pleased with the failure of the student loan servicer to heed the court’s prior discharge, ordered a hearing on the matter.  Again, demonstrating a deaf ear, the student loan servicer did not show up to the hearing. As a result, the court imposed an order sanctioning the servicer in the amount of $123,625.52 and ordered it to be paid to the court within 14 days.

Not surprisingly, the student loan servicer also ignored this sanctions order from the court. So the court issued a second order related to sanctions. Additionally, the court called a hearing to determine whether further sanctions should be added and the servicer should be held in contempt of court. Finally, the student loan servicer appeared in court and claimed that its inaction for the last five years was due to an “unintentional procedural error.”

The court deemed this explanation of the servicer to be “cavalier” and “wholly unsatisfactory.”  As a result, the court raised the sanctions owed by the student loan servicer to $354,629.62.

Proxifile helps individuals and businesses who are owed money navigate the complicated legal claims process. As the first “Claims as a Service” company, Proxifile combines deep expertise with innovative technology to [level the playing field for] traditionally neglected smaller creditors. By automating compliance and transparency, Proxifile revolutionizes the way claims are handled.

Proxifile makes it easy for creditors to defend their rights and file claims in bankruptcy. Proxifile customers never miss a court filing.

About Proxifile

Proxifile helps individuals and businesses who are owed money navigate the complicated legal claims process. As the first “Claims as a Service” company, Proxifile combines deep expertise with innovative technology to level the playing field for traditionally neglected smaller creditors. By automating compliance and transparency, Proxifile revolutionizes the way claims are handled.