Private School Tuition paid before filing Ch7

[exHCh7]

Hi,

My exH filed for Ch7 bankruptcy on September 20. On August 20 he took $19K out of his 401K account to pay for his step-kids (ages 16 and 18) private college prep high school tuition.

He and his wife are not filing jointly. He didn't mention the school tuition bill at all when he filed.

How does this play out with the trustee at his 341?

Thanks for helping me with these questions!

[daytona]

I don't see how it's a problem. If the money were still in a 401k it would be exempt from creditors anyway. As far as the 341, I would think the only potential "issue" would be if he is using private school tuition expenses in his Schedule J. He may not be, but if so, the trustee will be more interested in challanging the "expense", particularly if it would push the DMI up to make it a Ch13 case.

[tcreegan]

Hi exHCh7,

He is only allowed a $1500 per kid expense for private school tuition.

Tom in Colo

[exHCh7]

He listed the IRA withdrawals on his past two year's income (putting him at about $70K and $30K) which averages about $50K, well below the means test in our state for a 5-person household. So he should be protected from having to go Ch13.

He didn't list the private school tuition anywhere on his monthly expenses.

Would it be considered a preferential payment since it was 30 days before he filed? He has about $54K in cc debt. There is a $20K judgment with an aggressive collection attorney (wage garnishment, bank account seized etc.) I think the attorney was trying to seize the vehicle he just paid off which is what forced him to file.

Given the large amount it would seem his creditors, the pit-bull collection atty in particular, would want to try to get it divided up among everyone. That atty even went to the trouble of taking $65 from his bank account!

I don't know much about BK apart from what I have been reading since he filed, so I'm quite appreciative to everyone who has replied to my questions.

[momofthree]

He listed the IRA withdrawals on his past two year's income (putting him at about $70K and $30K) which averages about $50K, well below the means test in our state for a 5-person household. So he should be protected from having to go Ch13.

He didn't list the private school tuition anywhere on his monthly expenses.

Would it be considered a preferential payment since it was 30 days before he filed? He has about $54K in cc debt. There is a $20K judgment with an aggressive collection attorney (wage garnishment, bank account seized etc.) I think the attorney was trying to seize the vehicle he just paid off which is what forced him to file.

Given the large amount it would seem his creditors, the pit-bull collection atty in particular, would want to try to get it divided up among everyone. That atty even went to the trouble of taking $65 from his bank account!

I don't know much about BK apart from what I have been reading since he filed, so I'm quite appreciative to everyone who has replied to my questions.

I think this is going to be one of those issues that only an attorney in his district can answer accurately. If he hadn't paid the tuition, the money would have been exempt, in other words, he would have been able to keep it and no one could touch it. So, if he hadn't paid the school tuition, no one else would have gotten it anyway.

That said, once funds are withdrawn from a 401k, they are no longer exempt. But, again, they never would have been withdrawn if it weren't for the schooling. Really this could go either way....

Since he's not claiming it as an expense, and he paid for it with exempt funds, and it's for an ongoing service rather than to a creditor, I think he'll probably be okay. However, I'm not an attorney, and I'm not going to pretend to know the exact answer. He should really consult with his attorney on this issue.