Current through Register Vol. 51, No. 3, September 1, 2024
RELATES TO:
KRS
164.744(1),
164.748(4), (10),
(20),
164.753(2),
34 C.F.R.
682.410(b)(9),
20
U.S.C. 1071-1087-2,
1095a
NECESSITY, FUNCTION, AND CONFORMITY: Pursuant to
KRS
164.744(1) and
164.748(2),
the Kentucky Higher Education Assistance Authority has entered into agreements
with the secretary to provide loan guarantees in accordance with
20
U.S.C. 1071 through
1087-2.
20 U.S.C.
1095a permits a student loan guarantee agency
to garnish the disposable pay of a borrower to recover a loan guaranteed
pursuant to
20
U.S.C. 1071 through
1087-2,
notwithstanding a provision of state law. That section also permits the student
loan guarantee agency to establish procedures for requesting and conducting a
hearing related to the wage garnishment.
KRS
164.748(10) authorizes the
authority to collect from borrowers loans on which the authority has met its
guarantee obligation, and
KRS
164.748(20) authorizes the
authority to conduct administrative hearings, exempt from KRS Chapter 13B,
pertaining to wage garnishment. This administrative regulation establishes the
procedures for implementing wage garnishment in accordance with requirements of
the federal act.
Section 1.
(1) Following payment of a claim by the
authority to a participating lender by reason of the borrower's default in
repayment of an insured student loan, the authority, acting through its
executive director or other designee, may issue an administrative order for the
withholding of the debtor's disposable pay, which order shall conform to the
requirements of this section.
(2)
This administrative regulation shall apply to a debtor who is either a borrower
or an endorser of an insured student loan.
(3) An order for withholding of disposable
pay shall not be issued under this section nor become effective less than
thirty (30) days after the authority provides a written notice to the debtor by
personal service or mail, addressed to the debtor at the residence or
employment location last known to the authority. The notice shall include at
least the following information:
(a) The name
and address of the debtor;
(b) The
amount of the debt determined by the authority to be due;
(c) Information sufficient to identify the
basis for the debt;
(d) A statement
of the intention of the authority to issue an order for withholding of
disposable pay;
(e) A statement of
the right to dispute the existence, amount, or enforceability of the debt or
the terms of a proposed repayment schedule under the garnishment order (other
than a repayment schedule agreed to in writing pursuant to paragraph (g) of
this subsection);
(f) A statement
of the right to inspect and copy any records relating to the debt open to
inspection in accordance with
KRS
61.870 through
61.884;
(g) A statement of the opportunity to enter
into a written agreement with the authority, on terms satisfactory to the
authority, establishing a schedule for repayment of the debt;
(h) A statement that, unless there is good
cause determined by the authority for the debtor's failure to timely request a
hearing, the debtor's acquiescence to the withholding of disposable pay shall
be presumed; and
(i) A statement
that if the debtor requests a hearing, but fails to appear without good cause
determined by the hearing officer, the hearing officer shall affirm the
issuance of an order for withholding of disposable pay.
(4) An amount shall not be withheld from the
disposable pay of an individual during the first twelve (12) consecutive months
of reemployment commenced within twelve (12) months following an involuntary
separation from employment.
(5)
Establishment of a written repayment schedule in accordance with subsection
(3)(g) of this section shall be, for purposes of subsection (3)(e) of this
section, conclusive acknowledgement by the debtor of the existence and amount
of debt agreed to be paid.
Section
2.
(1)
(a) A hearing shall be provided if the
debtor, on or before the 30th day following the date on which the notice
required by Section 1(3) of this administrative regulation is mailed, files
with the authority a written request for a hearing in accordance with
procedures prescribed by this administrative regulation. The timely filing of a
request for a hearing (evidenced by a legibly dated U.S. Postal Service
postmark or mail receipt) shall automatically stay further collection activity
under this administrative regulation pending the outcome of the
hearing.
(b) If the debtor requests
a hearing, but the request is not timely filed, a hearing shall be provided,
but the request shall not stay further action pending the outcome of the
hearing provided a decision is rendered in the case by the 60th day following
receipt of the request for a hearing. If a final decision is not entered within
the sixty (60) day period following receipt of a request for a hearing, the
withholding order shall be suspended on the 61st day until a final decision is
entered.
(c) A hearing officer,
appointed by the authority (who shall not be an individual under the
supervision or control of the board other than an administrative law judge),
shall conduct the hearing.
(d) The
hearing shall be held during regular business hours: Monday through Friday
between the hours of 9 a.m. and 4 p.m. Eastern Standard Time.
(e) A hearing officer shall voluntarily
disqualify himself and withdraw from a case in which he cannot afford a fair
and impartial hearing or consideration.
1. A
party shall request the disqualification of a hearing officer by filing an
affidavit, upon discovery of facts establishing grounds for a disqualification,
stating the particular grounds upon which he claims that a fair and impartial
hearing cannot be accorded.
2. The
request for disqualification and the disposition of the request shall be a part
of the official record of the proceeding.
3. Grounds for disqualification of a hearing
officer shall include the following:
a.
Participating in an ex parte communication which would prejudice the
proceedings;
b. Having a pecuniary
interest in the outcome of the proceeding; or
c. Having a personal bias toward a party to a
proceeding which would cause a prejudgment on the outcome of the
proceeding.
(f)
A dispute hearing shall be conducted in Franklin County or another location
agreed to by the parties.
(g) In
lieu of an in-person hearing, upon request of the debtor, a hearing may be
conducted by telephone or the hearing officer may conduct a review based solely
upon submission of written material by both the debtor and the authority. An
in-person or telephonic hearing shall be mechanically, electronically, or
stenographically recorded.
(h)
Unless required for the disposition of an ex parte matter specifically
authorized by this administrative regulation, a hearing officer shall not
communicate off the record with a party to the hearing concerning a substantive
issue, while the proceeding is pending.
(2)
(a) The
hearing officer's decision, reason therefore, and an explanation of the appeal
process shall be rendered in writing no more than sixty (60) days after receipt
by the authority of the request for the hearing. The decision shall establish
the debtor's liability, if any, for repayment of the debt and the amount to be
withheld from the debtor's disposable pay.
(b) Subject to subsection (3)(b) of this
section, the hearing officer's decision shall be final and conclusive
pertaining to the right of the authority to issue an administrative order for
the withholding of the debtor's disposable pay.
(c) A person, upon request, shall receive a
copy of the official record at the cost of the requester. The party requesting
a recording or transcript of the hearing shall be responsible for transcription
costs. The official record of the hearing shall consist of:
1. All notices, pleadings, motions, and
intermediate rulings;
2. Any
prehearing order;
3. Evidence
received and considered;
4. A
statement of matters officially noticed;
5. Proffers of proof and objections and
rulings thereon;
6. Ex parte
communications placed upon the record by the hearing officer;
7. A recording or transcript of the
proceedings; and
8. The hearing
officer's decision or an order of the hearing officer issued pursuant to
Section 3(2)(e) of this administrative regulation.
(3)
(a) Following the issuance of the hearing
officer's decision, the debtor or the authority may petition the board to
review the decision.
(b) An adverse
decision by the hearing officer shall be appealed in writing to the board not
later than twenty (20) calendar days after the date of the hearing officer's
decision. A petition for review of the hearing officer's decision shall be
timely filed if received by the executive director within twenty (20) calendar
days after the date of the hearing officer's decision. If there is no appeal to
the board within twenty (20) days, the findings of the hearing officer shall be
conclusive and binding upon the parties.
(c) A petition for review of the hearing
officer's decision shall not stay a final order pending the outcome of the
review. If the debtor's liability is established by the hearing officer's
decision, an administrative order for withholding of disposable pay shall be
issued by the authority within sixty (60) days after the date of the hearing
officer's decision. If the debtor petitions the board to review the hearing
officer's decision and obtains reversal, modification, or remand of the hearing
officer's decision, the authority shall return to the debtor any money received
pursuant to the withholding order contrary to the final order of the
board.
(d) The respondent may,
within ten (10) calendar days from the date the petition was received by the
executive director, provide a brief statement to the board responding to the
petition of review. The response shall be timely filed if received by the
executive director within ten (10) calendar days from receipt by the executive
director of the petition for review.
(e) A petition for review of the hearing
officer's decision shall contain the following information:
1. A concise statement of the reason that the
petitioner asserts as the basis pursuant to paragraph (g) of this subsection
for reversing, modifying, or remanding the hearing officer's decision or an
order of the hearing officer issued pursuant to Section 3(2)(e) of this
administrative regulation;
2. A
statement specifying the part of the official record that the petitioner relies
upon to support reversing, modifying, or remanding the hearing officer's
decision pursuant to paragraph (g) of this subsection; and
3. A statement of whether the petitioner
believes that oral argument to the board is necessary.
(f) The board shall review the hearing
officer's decision at its next regularly scheduled meeting convened at least
thirty (30) days after the petition for review of the hearing officer's
decision is received or at a special meeting convened for that purpose within
ninety (90) days after receipt of the petition for review of the hearing
officer's decision, whichever first occurs.
(g) The board shall decide the dispute upon
the official record, unless there is fraud or misconduct involving a party, and
may consider oral arguments by the debtor and the authority. The board shall:
1. Not substitute its judgment for that of
the hearing officer as to the weight of the evidence on questions of fact;
and
2.
a. Uphold the hearing officer's decision
unless it is clearly unsupported by the evidence and the applicable
law;
b. Reject or modify, in whole
or in part, the hearing officer's decision; or
c. Remand the matter, including an order of
the hearing officer issued pursuant to Section 3(2)(e) of this administrative
regulation, in whole or in part, to the hearing officer for further proceedings
if it finds the hearing officer's final order is:
(i) In violation of constitutional or
statutory provisions;
(ii) In
excess of the statutory authority of the agency;
(iii) Without support of substantial evidence
on the whole record;
(iv)
Arbitrary, capricious, or characterized by abuse of discretion; or
(v) Based on an ex parte communication which
substantially prejudiced the rights of a party and likely affected the outcome
of the hearing.
(h) The final order of the board shall be in
writing. If the final order differs from the hearing officer's decision, it
shall include separate statements of findings of fact and conclusions of
law.
(4) The remedies
provided in this section shall not:
(a)
Preclude the use of other judicial or administrative remedies available to the
authority under state or federal law; and
(b) Be construed to stay the use of another
remedy.
Section
3. Hearing Procedure.
(1) The
debtor shall have the right to be heard by the hearing officer, be represented
by counsel, present evidence, cross examine, and make both opening and closing
statements.
(2)
(a) Upon request of a party, the hearing
officer may issue a subpoena for the production of a document or attendance of
a witness.
(b)
1. Not more than ten (10) business days after
the date of filing the request for a hearing or a review of written material,
the debtor shall submit to the counsel for the authority a written statement
specifically stating the basis of dispute.
2. Not less than fifteen (15) business days
prior to the hearing, the parties shall:
a.
Confer and jointly stipulate the issues that are in controversy to be resolved
by the hearing officer;
b. Discuss
the possibility of informal resolution of the dispute;
c. Exchange a witness list of the names,
addresses, and phone numbers of each witness expected to testify at the hearing
and a brief summary of the testimony of each witness that the party expects to
introduce into evidence; and
d.
Exchange an exhibit list identifying documents to be admitted into evidence at
the hearing and provide a legible copy of all exhibits.
3.
a. If
the debtor is unavailable or otherwise fails to confer and jointly stipulate
the issues pursuant to subparagraph 2 of this paragraph, the authority shall
serve upon the debtor proposed stipulation of issues. If within five (5)
calendar days, the debtor fails to respond to the proposed stipulation of
issues, the debtor shall be precluded from raising an additional issue not
identified in the proposed stipulation of issues.
b. If the debtor is unavailable or otherwise
fails to cooperate in a timely manner for the exchange of the witness or
exhibit lists, the debtor shall be precluded from admitting the information as
part of the evidence at the hearing.
4. The authority shall provide to the hearing
officer the documentation submitted in accordance with subparagraph 1 of this
paragraph and shall report to the hearing officer the results of the
discussions between the parties described in subparagraphs 2 and 3 of this
paragraph.
5. Additional time for
compliance with the requirements of this paragraph may be granted by the
hearing officer, upon request, if it does not prejudice the rights of the
authority or delay the rendering of a hearing decision within the time
prescribed in this subsection.
6.
If the debtor requests a hearing, but the debtor's written statement and
supporting documentation, considered from a viewpoint most favorable to the
debtor, does not reflect a genuine issue of fact or prima facie defense to the
legal enforceability of the authority's claim, the hearing officer, on petition
of the authority and notice to the debtor, may enter an order dismissing the
request for a hearing and authorizing issuance of the order described in
Section 5 of this administrative regulation.
(c) Facts recited in the authority's notice
pursuant to Section 1(3) of this administrative regulation that are not denied
shall be deemed admitted. Each party shall remain under an obligation to
disclose new or additional items of evidence or witnesses which may come to
their attention as soon as practicable.
(d)
1.
Either party, without leave of the hearing officer, may depose a witness, upon
reasonable notice to the witness and the opposing party, and submit to the
opposing party interrogatories or request for admissions.
2. The party receiving interrogatories or
request for admissions shall respond within fifteen (15) calendar
days.
3. Each matter of which an
admission is requested shall be deemed admitted unless, within fifteen (15)
days after service of the request or a shorter or longer time that the hearing
officer may allow, the party to whom the request is directed serves upon the
party requesting the admission a written answer or objection addressed to the
matter.
(e) Sufficient
grounds for entry of an appropriate order by the hearing officer, including
postponement, exclusion of evidence, dismissal of the appeal, quashing the
withholding order, or vacating the stay, shall exist if there is:
1. Noncompliance with this
subsection;
2. Failure of the
authority to:
a. Timely appoint a hearing
officer; or
b. Respond to a request
for inspection of records; or
3. Failure of the debtor to submit
information in accordance with paragraph (b) of this subsection.
(3) Order of proceeding.
(a) The hearing officer shall:
1. Convene an in-person or telephonic
hearing;
2. Identify the parties to
the action and the persons participating;
3. Admit into evidence the notice required by
Section 1(3) of this administrative regulation and the debtor's statement and
the stipulations required by subsection (2)(b)1 and 2 of this
section;
4. Solicit from the
parties and dispose of any objections or motions;
5. Accept into evidence any documentary
evidence not objected to;
6.
Solicit opening statements; and
7.
Proceed with the taking of proof.
(b) The taking of proof shall commence first
by the debtor and then by the authority, with opportunities for
cross-examination, rebuttal, and closing statements.
(4) Rules of evidence.
(a) All testimony shall be made under oath or
affirmation.
1. The hearing officer shall not
admit evidence that is excludable as a violation of an individual's
constitutional or statutory rights or a privilege recognized by the courts of
the Commonwealth.
2. Statutes or
judicial rules pertaining to the admission of evidence in a judicial proceeding
shall not apply to a hearing under this section.
3. The hearing officer may receive evidence
deemed reliable and relevant, including evidence that would be considered
hearsay if presented in court, except that hearsay evidence shall not be
sufficient in itself to support the hearing officer's decision.
4. A copy of a document shall be admissible
if:
a. There is minimal authentication to
establish a reasonable presumption of its genuineness and accuracy; or
b. It is admitted without
objection.
5. The hearing
officer may exclude evidence deemed unreliable, irrelevant, incompetent,
immaterial, or unduly repetitious.
(b) An objection to an evidentiary offer may
be made by any party and shall be noted in the record.
(c) The hearing officer:
1. May take official notice of:
a. Statutes and administrative
regulations;
b. Facts which are not
in dispute; and
c.
Generally-recognized technical or scientific facts;
2. Shall notify all parties, either before or
during the hearing of a fact so noticed and its source; and
3. Shall give each party an opportunity to
contest facts officially noticed.
(d) At the discretion of the hearing officer,
the parties may be allowed up to fifteen (15) days following the hearing to
submit written arguments or briefs.
(5) Upon request of either party, the record
of the hearing shall be transcribed, and shall be available to the parties at
their own expense.
(6) Burden of
proof.
(a) The authority shall have the burden
to establish the existence and amount of the debt.
(b) The debtor shall have the burden to
establish an affirmative defense.
(c) The party with the burden of proof on an
issue shall have the burden of going forward and the ultimate burden of
persuasion as to that issue. The ultimate burden of persuasion shall be met by
a prima facie establishment of relevant, uncontroverted facts or, if relevant
facts are disputed, a preponderance of evidence in the record.
(d) Failure to meet the burden of proof shall
be grounds for a summary order from the hearing officer.
Section 4. Defenses.
(1) Except as provided in subsection (2) of
this section, a debtor may assert a defense to the issuance of an
administrative order to withhold the debtor's disposable pay, legal or
equitable, pertaining to the existence, amount, or enforceability of the debt
or the terms of a proposed repayment schedule under the garnishment order
(other than a repayment schedule agreed to in writing pursuant to Section
1(3)(g) of this administrative regulation).
(2) The hearing officer shall not consider as
a defense a question of law or fact that has previously been adjudicated by a
court of competent jurisdiction or by an independent third-party trier of fact
in an administrative proceeding involving the debtor and the authority
pertaining to the existence, amount, or the debtor's liability on the
particular debt in question or the terms of a prior repayment
schedule.
(3) If the debtor asserts
as a defense a question of law or fact that was previously raised in an
administrative proceeding before the authority pursuant to
11 KAR
4:030 or
11 KAR
4:050, the hearing officer:
(a) Shall:
1. Consider the matter; and
2. Give deference to the prior decision by
the authority in the same manner that a court would give deference in reviewing
the decision of an administrative agency; and
(b) May reverse the prior decision if the
debtor presents evidence that:
1.
Circumstances have changed or new information is available; or
2. The prior decision:
a. Substantially disregarded or ignored the
defense; or
b. Was arbitrary,
capricious, not supported by the facts, or made through fraud.
(4) If the
debtor asserts as a defense a claim of entitlement to discharge of the
particular debt pursuant to
34
C.F.R. 682.402, except for reason of
bankruptcy, but has not previously sought discharge by the authority for that
specific reason, the hearing officer shall stay the hearing for a period
sufficient to permit the debtor to submit documentation to the authority for a
determination of eligibility for entitlement to the discharge. At the
expiration of the period of stay, the hearing officer shall review the
circumstances and:
(a) Uphold the right of
the authority to issue an order of wage withholding if the debtor has failed to
submit documentation to the authority for review of entitlement to
discharge;
(b) Dismiss the request
for hearing if the debtor has submitted documentation and the authority has
approved discharge of the debt; or
(c) Proceed with the hearing if the debtor
submitted documentation and the authority denied discharge, except that the
hearing officer shall consider the defense of entitlement to discharge in
accordance with subsection (3) of this section.
(5) If the debtor asserts as a defense a
claim that the debt was dischargeable in a previous bankruptcy pursuant to
11 U.S.C.
523(a)(8), but the debtor
did not previously seek discharge by the bankruptcy court, the hearing officer
shall stay the hearing for a period sufficient to permit the debtor to reopen
the bankruptcy case. At the expiration of the period of stay, the hearing
officer shall review the circumstances and:
(a) Uphold the right of the authority to
issue an order of wage withholding if the debtor has failed to obtain the
bankruptcy court's permission to reopen the bankruptcy case to seek discharge
of the particular debt; or
(b)
Dismiss the request for hearing if the bankruptcy court has reopened the
bankruptcy case to consider discharge of the particular
debt.
(6)
(a) If the debtor asserts as a defense a
claim that withholding of his disposable pay would constitute an extreme
financial hardship, the debtor shall submit documentation of all available
resources and actual expenses and shall have the burden of demonstrating the
necessity of actual expenses.
(b)
The hearing officer shall compare the debtor's available resources and the
necessary expenses and current debt obligations of the debtor and debtor's
dependents. The hearing officer shall determine that extreme financial hardship
exists if the debtor currently is not able to provide at least minimal
subsistence for the debtor and debtor's dependents that could be claimed on a
federal income tax return. The hearing officer shall consider as available
resources of the debtor income of the debtor, the debtor's spouse, and debtor's
dependents from all sources, including nontaxable income and government
benefits, expenses paid on behalf of the debtor by another person, and the cash
value of any current liquid assets, such as bank accounts and investments. The
hearing officer shall consider the claim of extreme financial hardship in
accordance with the presumptions established in this paragraph.
1. Withholding of an amount of disposable pay
shall constitute an extreme financial hardship if the debtor's available
resources from all sources do not exceed the applicable poverty guideline,
multiplied by 125 percent, based on the debtor's family size and state of
residence. The poverty guidelines to be utilized for this purpose shall be the
latest federal poverty measurement guidelines issued by the United States
Department of Health and Human Services and published annually in the Federal
Register, under the authority of
42
U.S.C. 9902(2).
2. The debtor's actual monthly expenses shall
be compared to the most recently revised Collection Financial Standards issued
by the Internal Revenue Service based on the debtor's family size and state of
residence. Actual expenditures by the debtor's family that exceed the
applicable amount for a category shall be presumed unnecessary.
Section 5.
(1) An administrative order issued by the
authority to withhold disposable pay shall be served upon the debtor's employer
personally or by mail. A notice of the issuance of the order shall be provided
to the debtor by regular first class mail. The order shall require the
withholding and delivery to the authority of not more than fifteen (15) percent
of the debtor's disposable pay, except that a greater percentage may be
deducted upon the written consent of the debtor.
(2) The order shall state the amount or
percentage to be withheld and the amount of the debt, the statutory and
regulatory basis therefore, and the time withholding is to begin.
(3) The order shall continue to operate until
the debt is paid in full with interest accrued and accruing thereon at the
prescribed rate in the promissory note or applicable law and collection costs
that may be charged to the borrower under the promissory note or applicable
law. The order shall have the same priority as provided to a judicially ordered
garnishment prescribed in
KRS
425.506.
(4) An employer who has been served with an
administrative order for withholding of earnings shall answer the order within
twenty (20) days, and shall provide a copy to the debtor the first time that
withholding occurs and each time thereafter that a different amount is
withheld. The employer shall be liable to the authority for a lawfully due
amount which the employer fails to withhold from disposable pay due the debtor
following receipt of the order, plus attorneys' fees, costs, and, in the
discretion of a court of competent jurisdiction, punitive damages.
(5) A withholding under this section shall
not be grounds for discharge from employment, refusal to employ, or
disciplinary action against an employee subject to withholding under this
section.
(6) The employer shall
have no liability or further responsibility after properly, completely, and
timely fulfilling the duties under this section.
Section 6.
(1) Whenever this administrative regulation
requires delivery of a notice, subpoena, or other communication by personal
service, the service shall be made by:
(a) An
officer authorized under
KRS
454.140 to serve process; or
(b) A person over the age of eighteen (18)
years of age, who shall prove service by affidavit or by the signature of the
person being served.
(2)
Receipt of a notice or other communication by the debtor shall be rebuttably
presumed if the person to be served or another adult with apparent authority at
the place of residence or employment last known to the authority signs a
receipt or refuses to accept the notice or communication after identification
and offer of delivery to the person so refusing.
(3) For an administrative order to withhold
disposable pay served upon an employer, receipt shall provide a rebuttable
presumption if:
(a) The person to whom the
order is directed signs or refuses to sign a receipt; or
(b) His employee or agent with apparent
authority signs or refuses to sign a receipt.
STATUTORY AUTHORITY:
KRS
164.748(4),
164.753(2),
20 U.S.C.
1095a