Each year, millions of parents across America write checks to institutions of higher learning, in payment of tuition and charges for their children to pursue a college degree. Inevitably, some of those parents end up in the bankruptcy courts. In recent years, trustees have found an attractive potential source of estate recovery: pursuing the colleges and universities to recover tuition and related payments as constructive fraudulent transfers.
Amendments to the Federal Rules of Bankruptcy Procedure became effective on December 1, 2017, which impose affirmative obligations on secured creditors to protect their rights to distributions in a bankruptcy case. Previously, Bankruptcy Rule 3002(a) required only unsecured creditors and equity security holders to file proofs of claim or proofs of interest in a bankruptcy. Although often recommended, it was not statutorily necessary for a secured creditor to file a proof of claim in order to protect its rights.
For the third time in less than two years, the Eleventh Circuit Court of Appeals has ruled that a chapter 7 debtor who does not reaffirm the secured debt or redeem the property must surrender the property. In re Woide, No. 17-10776 (11th Cir. Apr. 5, 2018).
On March 28, 2018, the Ninth Circuit Court of Appeals addressed both the in rem jurisdiction of a federal district court sitting in admiralty vis-a-vis an intervening bankruptcy, and in a question of first impression in the Ninth Circuit, the proper approach to setting the amount of maintenance an injured seaman is entitled to receive prior to trial. In Barnes v. Sea Hawaii Rafting, LLC, ___ F.3d ___ (9th Cir.
Reprinted with permission of the American Bankruptcy Institute Law Review. Originally published at 26 Amer. Bankr. Inst. L. Rev. 115 (2018).
Toys “R” Us filed for bankruptcy in September 2017, with hopes that a strong holiday season would facilitate a successful reorganization.
Good news for colleges: Connecticut may be on the leading edge of a trend to bar bankruptcy trustees from pursuing colleges when parents default on their “Parent PLUS” loans.
When a parent signs a “Parent PLUS” loan to help her child pay for college and she later finds herself in bankruptcy, bankruptcy trustees often sue the child’s college to recover loan disbursements as a fraudulent transfer. Over the last several years, the law has allowed such claims.
Fifth Circuit Rejects Breach of Fiduciary Duty and Fraudulent Transfer Claims
By Michael L. Cook*
Recently, the Eighth Circuit Court of Appeals issued a ruling that overdraft payments advanced by Banks which are later repaid by their customer constitute preferential transfers under the Bankruptcy Code. In re Agriprocessors, Inc., involved a meat packing company which periodically overdrew its bank accounts, and the bank issued provisional credit to cover the overdrafts. The bank initially denominated those overdrafts as “intraday” overdrafts until the midnight settlement deadline, at which point they became “true” overdrafts.