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() Summary: Change in Borrower Pending Bankruptcy Operational Procedures

Publication Date: May 2004

Bulletin ID: DLB-04-14

Summary: Change in Borrower Pending Bankruptcy Operational Procedures

Posted on 05-05-2004

May 2004

DLB-04-14

Subject: Change in Borrower Pending Bankruptcy Operational Procedures

Dear Partner:

We recently reevaluated FSA's operational procedures related to a borrower's pending bankruptcy. Based on the fact that each loan and disbursement made under a Master Promissory Note (MPN) is clearly identifiable by date and can be identified as having been made before or after a borrower's bankruptcy filing, we have determined that it is appropriate to change our operational procedures related to pending bankruptcies.

Effective May 3, 2004 the Common Origination and Disbursement (COD) System will no longer--

  • Inactivate and flag a borrower's MPNs that were received before the borrower filed for bankruptcy;
  • Require a new MPN for loans that are made after the borrower filed for bankruptcy (unless the MPN has otherwise expired); and
  • Reject disbursements that were made after the borrower filed for bankruptcy.

Additionally, we are developing a plan for resolving outstanding issues associated with all MPNs, loans, and disbursements that were affected by our previous operational procedures related to pending bankruptcies. This means that the inactivation and flagging of MPNs affected by pending bankruptcies will be reversed to allow previously rejected disbursements to be accepted. We expect to implement this plan in the very near future. If you have an outstanding issue, please wait for us to notify you in subsequent Direct Loan Bulletins and COD Processing Updates when you may resubmit previously rejected disbursements.

If you have any questions about this bulletin, please contact the COD School Relations Center at 800/848-0978 or via email at
codsupport@acs-inc.com

Thank you for your patience while we were reevaluating our previous operational procedures and as we implement the new ones.

Sincerely,

Jane Holman
Acting Director, Title IV Delivery
Schools Channel