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Bankruptcy court seeks to claw back student tuition money

Many parents help their kids pay for college. Whether they are able to pay out of savings, take out equity against their property or secure federal and private loans, some Tennessee parents are willing to put their financial health on the line in order to give their kids a chance at pursuing higher education. It may not seem like if a parent pursues bankruptcy that the money they pay for their kids' educations should be pursuable by bankruptcy courts, but in some cases, bankruptcy courts are trying to do just that.

At present, a bankruptcy trustee is trying to get a private college to surrender money it received on behalf of a student whose parents filed for personal bankruptcy. The parents secured a federal loan and are the only ones responsible for the loan's repayment. The trustee contends that the loan value is the parents' property as they are the only ones responsible for satisfying the debt; the court hearing the matter is yet to rule on whether the loan can be clawed back from the college.

Bankruptcy is a very complicated branch of the law. And this is a unique issue. But it is by no means the only tricky issue other. To the contrary, many issues as complicated or more so exist that can challenge the success of a bankruptcy filing. For this reason, it is helpful for individuals who choose to pursue personal bankruptcy to have the help of a bankruptcy professional as they prepare their petitions to begin the process.

A person can face many financial challenges during his life and in the end he may decide that bankruptcy is the right path for remedying his money problems. Based on this story, it appears that some of the financial decisions that a person may make to help others may be affected by pursuing the bankruptcy process. A student's tuition may be pulled out of her college and turned over to a bankruptcy court due to her parents' financial decisions.

Source: The Wall Street Journal, "Judge Drills Down on Tuition Payments in Parents' Bankruptcy," Katy Stech, Sept. 25, 2015

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