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First Circuit Allows Bankruptcy Trustee to Recover College Tuition Payments
Westlaw Journal – Bankruptcy
December 12, 2019
An insolvent parent’s college “tuition payments … depleted the [debtor’s] estate and furnished nothing of direct value to the [debtor’s] creditors …,” held the U.S. Court of Appeals for the First Circuit on Nov. 12, 2019. In re Palladino, 2019 WL 5883721, *3 (1st Cir. Nov. 12, 2019). Reversing the bankruptcy court on a direct appeal, the First Circuit rejected its reasoning “that a financially self-sufficient daughter offered [the debtor parents] an economic benefit.” Id. at *2. Instead, held the First Circuit, because the tuition payments were fraudulent transfers, the trustee “is entitled to avoid the tuition payments” and recover them from the college. Id. at *3n. 5. In this article, of counsel Michael Cook discusses the court’s decision and what it may mean for tuition-dependent schools and colleges in the future.
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