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Global Restructuring & Insolvency Developments

Fraudulent Transfer

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Bankruptcy Trustees Receive Early Holiday Present – a Circuit Level Win Against Colleges in the Tuition Clawback Cases

November 13, 2019

Authors

Mark Duedall

Bankruptcy Trustees Receive Early Holiday Present – a Circuit Level Win Against Colleges in the Tuition Clawback Cases

November 13, 2019

by: Mark Duedall

 

We here at the Global Restructuring & Insolvency Developments (GRID to our friends) have been following the tuition clawback wars for a few years – the cases in which a bankruptcy trustee sues a college to return tuition that the bankrupt parent paid for  their child when the parent was otherwise stiffing other creditors.  It is a textbook constructively fraudulent transfer because the parent(s) do not receive reasonably equivalent value (or anything, for that matter) for the payment of the kid’s tuition.  Our prior coverage is here and here.  (And for those of you who want to really geek out on this, here’s a video of an entire symposium panel on the topic, from our friends at the Emory Bankruptcy Developments Journal.)

Anywho, yesterday the First Circuit decided the long-awaited appeal in DeGiacomo v.

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No Trustee Left Behind – Another Bankruptcy Court Requires Colleges to Return Tuition to the Bankruptcy Estate

February 13, 2017

Authors

Mark Duedall

No Trustee Left Behind – Another Bankruptcy Court Requires Colleges to Return Tuition to the Bankruptcy Estate

February 13, 2017

by: Mark Duedall

b09036864402bfedc690a2f80d6de804Another bankruptcy trustee catches another hapless college unaware.  In Roach v. Skidmore College (In re Dunston), Bankr. S.D. Ga. (Jan 31, 2017), a trustee appears to win the next battle of “bankruptcy estates v. child’s college,” ruling that an insolvent parent who paid the college tuition of an adult child made a fraudulent transfer to the college.  Thus, the unsuspecting college will likely have to return the tuition to the parent’s bankruptcy estate.

The theory is simple (albeit unsettling to some).  Under Section 548 of the Bankruptcy Code (and applicable state law, as a back-up), if any debtor makes a transfer to a third party while insolvent, and does not receive reasonably equivalent value in return, the debtor’s bankruptcy trustee may reclaim such transfer

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