College Tuition Payment, Preferential?

[backontrackOH]

We are getting ready to file a chapter 7 bankruptcy and I suddenly realized something. For the past several months we have been making $600/month payments for the balance of my son's college tuition. He is paying most of it through a grant, scholarship and student loans. We just make up the difference, which is about $1800 per quarter (we're on a monthly payment plan). I have been using income from a second job to make these payments. Will the court consider the tuition payments as preferential? If so, what are my options? Any advice is greatly appreciated.

[lrprn]

We are getting ready to file a chapter 7 bankruptcy and I suddenly realized something. For the past several months we have been making $600/month payments for the balance of my son's college tuition. He is paying most of it through a grant, scholarship and student loans. We just make up the difference, which is about $1800 per quarter (we're on a monthly payment plan). I have been using income from a second job to make these payments. Will the court consider the tuition payments as preferential? If so, what are my options? Any advice is greatly appreciated.

Are your tuition payments set by a specific signed contract by the two of you with the university? If yes, then is the contract tied to any assets of yours? (I'm trying to figure out if the payments will be considered secured or not by the court.)

[backontrackOH]

No, there is no signed contract between the college and me or my son. My son is the one actually enrolled in the college's monthly payment plan (online agreement, no signature required). He has little income while attending school, so I have been making the monthly payments for him.

[lrprn]

No, there is no signed contract between the college and me or my son. My son is the one actually enrolled in the college's monthly payment plan (online agreement, no signature required). He has little income while attending school, so I have been making the monthly payments for him.

Sounds like you aren't legally connected to the tuition agreement and are not financially responsible in any way for them then. That pretty much removes the trustee finding the tuition payments you are making for your son as preferential - the college isn't your creditor so payments to them can't be preferential over your other creditors - that's the good news. (Please confirm this with your lawyer to make sure, though.)However, your trustee may force you to stop making the payments during your active bankruptcy though, so be prepared for that.

The bad news - since the tuition isn't your debt, you can't count the monthly payments as an expense when you file bk. Is that going to impact your ability to show no disposable income when you file Ch 7?

[backontrackOH]

Not so much, in that disposable income will be very hard to come by this year. My first job is barely enough for the five of us to get by on, and my second job income has been cut in half compared to last year thanks to the economy.