Students: It’s Time to Un-Stuff Your Mattresses!

The Court of Appeals reversed the trial court and held that student loan funds that are deposited into a personal bank account are exempt from being attached by a judgment creditor.

Nikki Brindle and Patrick J. Arata entered into an agreed judgment whereby Brindle would pay Arata for legal services provided. Arata initiated proceedings to seek funds from Brindle’s bank account at National City Bank, at which time contained $3,367.01. A week later, Brindle filed an exemption claim and requested a hearing. At the hearing, Brindle introduced a voucher from the Academy of Art University stating that she would receive a check in the amount of $3,268.00 which was the amount left over after her tuition was paid to the university. The trial court denied Brindle’s exemption claim and ordered all funds except $300.00 to be transferred. The court stated the funds lost their exempt status when they were deposited into her bank account. Brindle appealed.

In Nikki Brindle v. Patrick J. Arata, No. 02A05-1004-SC-239, the Court of Appeals held that under U.S.C. Title 20 section 1095a, regarding wage garnishments, the plain language of the statute was clear that student loan funds and property traceable to those funds were exempt from garnishment or attachment. Furthermore, because there were no provisions to terminate this status, a contrary decision would render section 1095a meaningless, which the Court doubted was Congress’ intent. It stated that almost every recipient of student funds deposits their funds into a personal bank account and that it “could not imagine that Congress wishes those who receive student loans to stuff their mattresses with their rent money to prevent judgment creditors from attaching it.” Additionally, it distinguished the garnishment of retirement funds after they were deposited from the garnishment of student loan funds. The federal statutes are only extended to protect from the collection of student loans. The Court stated that “not being able to give something away is quite different from having it protected from being taken away.” Retirement fund statutes do not apply to student loans. Therefore, the trial court’s holding was erroneous because the student loan funds that Brindle deposited into her bank account were protected, and Arata was prohibited from attachment. Trial court’s holding is reversed.

About Bose McKinney & Evans LLP

Bose McKinney & Evans LLP is a business law firm, headquartered in Indianapolis, Indiana, serving both publicly held and privately held businesses, governmental entities and high-growth industries. Our clients include Fortune 100 companies, international manufacturers, national and regional financial institutions, agribusinesses, sports teams, university-incubated start-ups, media, utilities, cities and schools, to name a few. We strive to build strong relationships with our clients as key business advisors, to exceed expectations in the quality of our work, to be knowledgeable about our clients’ businesses and sectors, to be responsive to service needs and to continually seek to improve the delivery of client services. Our ultimate focus is on our clients.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s