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Bankruptcy Trustees Increasingly Try To Claw Back Tuition Money

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Can I get rid of student loans by declaring bankruptcy?”

 

Tuition recovery lawsuits are a recent development that bankruptcy trustees, courts and families are only just starting to contend with. Experts say tuition recovery lawsuits used to be unheard of because court-appointed trustees did not feel it was worth their time to pursue. However, times have changed as college costs have risen dramatically in recent years. Parents feel the need to chip in to spare their kids from monumental student loan debt, something that then deprives creditors of money they feel they are entitled to. As a result, experts say they expect these kinds of claw back attempts to ramp up even further.

 

Crab claw Charlotte Debt Lawyer Mecklenburg Bankruptcy FirmWhat is tuition recovery?

 

Tuition recovery lawsuits exist when a bankruptcy trustee fights to get money spent by bankruptcy filers on the tuition of their children. This money can be minimal in some cases or substantial in others. In a 2010 case, a trustee fought to claw back nearly $62,000 in tuition payments that one couple made for their son.

 

What’s causing the increase?

 

Tuition recovery lawsuits are a decidedly recent phenomenon. In decades past, tuition payments were so small that it wouldn’t be worth the trustee’s time to pursue. That’s changed, with some private schools costing upwards of $50,000 a year, an amount of money that, if recovered, could be used to cover other debts.

 

Who is bringing the lawsuits?

 
The people bringing the lawsuits are court-appointed bankruptcy trustees. The reason for the claims is because the trustees have a legal obligation to recover as much money as possible for the benefit of the creditors. The trustees are able to look back through previous payments and transfers made by the filers in the years preceding the bankruptcy. Trustees have a duty to bring these tuition recovery lawsuits unless they are able to say that the benefit of suing is outweighed by the cost of recovery.

 

Impact of the tuition recovery lawsuits

 

Experts say that though the justification for the tuition recovery lawsuits makes some sense, the problem is that they have very negative consequences for families. Essentially, the tuition recovery can turn parents against children, with trustees suing schools and, in some cases, the children themselves to try and recover money spent on tuition. In one case out of Boston, a child was sued after his parents filed for bankruptcy and eventually agreed to pay the trustee $10,000, hitting the student hard to the benefit of the parents’ creditors.

 

What about secondary schools?

 

Trustees are dramatically less likely to try and recover money spent on elementary and secondary schools. Experts say the reason is that states require parents to care for their children, including providing an education, until they become adults. A few trustees have tried to recover money spent on secondary schooling and thus far none have succeeded.

 

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.

 

 

About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.

 

 

Sources:

http://blogs.wsj.com/bankruptcy/2015/05/06/whats-behind-bankruptcy-lawsuits-over-college-tuition/

 

 

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http://www.freeimages.com/photo/crab-claw-lighter-1416799

 

 

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