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Bankruptcies forcing Colleges to Return Tuition Money for Parents of Filers

The Wall Street Journal reported last May bankruptcy courts are seeing increased traffic lately from parents who file for bankruptcy over their children’s college tuition costs. Increasingly, the trustee responsible for collecting money on behalf of creditors has decided to return tuition to insolvent parents in order to have the parents pay off debt with the money instead.

Since 2008 over 25 colleges have been asked to return tuition money with more than a dozen following through with repayment. New York University, for example, was sued in October of last year to return just over $27,000 for a Minnesota family who was in debt. An NYU spokesman responded, saying it is, “deeply unfair to that institution which has provided real value to the family.”

Another university was sued by the trustee in charge of recovering money for creditors when a student’s parents filed for chapter 7 bankruptcy back in 2013. The school returned $4,000.

While figures are not extant, both chapter 7 trustees and consumer bankruptcy lawyers agree such suits were not happening in significant numbers as they are today and they expect such tuition-related lawsuits to increase moving forward.

If you are facing bankruptcy for any reason, reach out to the Denton Law Group—(619) 458-3739.