Bankruptcy Case Law Update

Happy 2020!

Bankruptcy is STILL an incredible benefit available to us consumers.

One of the most satisfying features about consumer Bankruptcy (Chapter 7 & Chapter 13) in the United States is that much of it is clear-cut; black-and-white; predictable. That being said, there are still the grey areas that are still in flux, or have mixed applications across the United States Federal Courts.

One area that recently came to the forefront of the news is parents paying for their adult children’s college tuition. In the case of DeGiacomo v. Sacred Heart University, Inc., the First Circuit Court of Appeals (Northeastern United States) implied that it was a constructively fraudulent transfer for a Chapter 7 Debtor-parent to pay their adult child’s college tuition within the 4 years immediately preceding the bankruptcy filing, per 11 USC Section 548(a)(1)(B).

There are a few caveats to remember about the above case: 1) It is a First Circuit case (Ohio is in the Sixth Circuit), and thus it is not necessarily an authority to Ohio cases. 2) The Debtors had an otherwise unsympathetic case, in that they were involved in a multi-million dollar ponzi scheme. And (3) even if the rule will apply to Ohio cases going forward, the Chapter 7 trustee’s remedy is simply to pursue the educational institution, not the individual Debtors. Now that last point is a double-edged sword: The parents will not be asked to pay the money directly to the bankruptcy, but because the educational institution will have to disgorge that money, the institution is likely to pursue the child/parent for those now-unpaid fees.

This is an uncommon scenario, but it is something to think about and to keep an eye on going forward.

This is just another reason to contact a bankruptcy attorney as soon as you’re feeling a struggle with your budget. A bankruptcy attorney can help you maneuver the system and avoid certain pitfalls, such as this.

Bankruptcy is an incredible benefit available to us consumers.
Call/Text me today @ 740-815-1114, and LucasRuffingLaw@gmail.com to schedule a FREE consultation.

 -Lucas Ruffing
Bankruptcy Attorney
740-815-1114
LucasRuffingLaw@gmail.com