I need some input from any of you fine folks who have dealt with this situation. We are dealing with a Chapter 11 case but experiences from any who have filed Chapter 13 should help.
We have a Chapter 11 client who has two children, ages 20 & 22. Both children are full time college students attending relatively expensive schools. Both are still considered “dependants” for tax purposes. Our client was a very high income earning but the income, while still high, is quite reduced. The college expenses however are not. Besides the normal college expenses (tuition and books) the client is paying for all living expenses and auto expenses. I do not want to give amounts as I do not want to sway the responses one way or the other.
For those of you who have “adult” children, who are still dependants and are in college, what, if any, objections were raised in your cases to diverting income away from creditors to pay for such expenses? What were you allowed to pay vs. what you wanted to pay?
Now, remember, this is a Chapter 11. We are the Trustee therefore there is no Trustee who is going to look at the diversion of income for the college expenses. Another difference is that the debtor is not making payments to anyone (exluding any secured debt such as a home or car). Funds are deposited into a Debtor-In-Possession account and are spent by the debtor on a monthly basis. The debtor files monthly operating reports which are quite detailed, showing where the funds are going so there is no “fudging” the numbers. Payments to creditors (unsecured) do not start until the Plan is Confirmed.
What we have is one nasty unsecured creditor who is most likely going to object to the payment of the college related expenses for the 2 children. I am trying to get a feel for what is “reasonable” based upon objections that have been raised in your cases, either by your Trustee or a creditor.
Thanks in advance.
Des.
We have a Chapter 11 client who has two children, ages 20 & 22. Both children are full time college students attending relatively expensive schools. Both are still considered “dependants” for tax purposes. Our client was a very high income earning but the income, while still high, is quite reduced. The college expenses however are not. Besides the normal college expenses (tuition and books) the client is paying for all living expenses and auto expenses. I do not want to give amounts as I do not want to sway the responses one way or the other.
For those of you who have “adult” children, who are still dependants and are in college, what, if any, objections were raised in your cases to diverting income away from creditors to pay for such expenses? What were you allowed to pay vs. what you wanted to pay?
Now, remember, this is a Chapter 11. We are the Trustee therefore there is no Trustee who is going to look at the diversion of income for the college expenses. Another difference is that the debtor is not making payments to anyone (exluding any secured debt such as a home or car). Funds are deposited into a Debtor-In-Possession account and are spent by the debtor on a monthly basis. The debtor files monthly operating reports which are quite detailed, showing where the funds are going so there is no “fudging” the numbers. Payments to creditors (unsecured) do not start until the Plan is Confirmed.
What we have is one nasty unsecured creditor who is most likely going to object to the payment of the college related expenses for the 2 children. I am trying to get a feel for what is “reasonable” based upon objections that have been raised in your cases, either by your Trustee or a creditor.
Thanks in advance.
Des.
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