Recently, a bankruptcy trustee in New Haven Connecticut filed suit against
Johnson & Wales University alleging that tuition payments made by
the debtors should be returned by the University. The trustee is alleging
that the debtors’ daughter benefitted from the payments made to
the University and not the debtors.
It is reported that 3.1 million parents owe a combined $68 billion under
the Parent Plus student loan program. Although parents do not directly
derive a benefit from making such student loan payments, they are treated
as obligors to the debt and are therefore personally liable on the student
loans. This has caused some bankruptcy trustees to seek the return of
funds that parents have contributed towards the costs of college.
Battles between bankruptcy trustees and colleges are on the rise. Historically,
bankruptcy trustees did not pursue tuition payments made by debtors on
behalf of their children because such payments were not as large or prevalent.
Now, with college costs rising, this trend will continue because more
parents are contributing larger sums to their kids. Member of the House
Chris Collins (R-NY) recently introduced a bill designed to prevent trustees
from pursuing these payments when they were made several years ago.
Although Collins’s bill might reduce the prevalence of these types
of lawsuits, they do not seem to be slowing down at the moment. Student
loans account for a large portion of the debts of many Americans. Legislating
the ability to discharge student loans will not be accomplished any time
soon. However, given the growing mountain of student loan debt, there
will need to be some kind of safety valve for overburdened student borrowers
and the economy that depends on them. A generation of people unable to
spend money in the marketplace does not make for a healthy economy.
To read more about the Johnson & Wales University case, please
Do you have a question about bankruptcy or student loan debt? A Chicago
bankruptcy lawyer from Sulaiman Law Group, LTD is available to help.Schedule your consultation by calling (312) 313-1613.