It seems that families trying to educate their children can’t catch a break with the Bankruptcy Code. In 2005, the Bankruptcy Code was amended to add a means test to Chapter 7 and Chapter 13 cases. One of the biggest changes to expenses allowed to a potential 7 or 13 filer was that education expenses for minor children were limited to just over $100 per month. See 11 U.S.C. § 707(b)(2)(IV)

(IV) In addition, the debtor’s monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,500 1 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I).

While a great benefit to credit card companies, payday lenders and other unsecured creditors, the policy choice of Congress to deny funding for education resources for children in favor of repayment of unsecured debt is truly striking. I have had many difficult conversations with clients regarding the necessity to stop payments for private schools where children have flourished for many years in order to attempt to qualify for filing bankruptcy and save a family home.

Now it appears that minor children are not the only ones who are targeted by creditors and trustees. A recent 1st Circuit Court of Appeals opinion has found that the payment of college tuition for adult children by a couple who filed for Chapter 7 relief was a fraudulent transfer and could be recovered from the college.

Be sure to obtain the proper legal advice for your financial situation prior to any decision to file bankruptcy. At Mickler & Mickler we fight every day to protect your family from poor financial planning. Our office has the experience and the dedication that you deserve when your family is looking for financial help. Please contact us at 904-725-0822 or for any additional questions.