July 2015

PACT: Will Congress Except College Tuition Payments from Avoidance?

American Bankruptcy Institute Journal
Lynne B. Xerras
An emerging trend in consumer bankruptcy cases is causing concern for many parents, students and undergraduate schools. As recently reported by The Wall Street Journal and the ABI Journal, an increasing number of colleges and universities find themselves defending litigation initiated by chapter 7 trustees administering bankruptcy cases of the parents of past or present students. These trustees seek to recover the value of tuition payments funded by the debtor/parents on behalf of an adult child in the years preceding the parents' bankruptcy filing on the basis that those transfers were "constructively" fraudulent and therefore avoidable under either §§ 544 or 548 of the Bankruptcy Code.

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