08 Oct Bankruptcy and College Tuition For Your Children
Unfortunately, Congress says that credit cards are more important than college. The Means Test, for Above Median Debtors,will not deduct yourchildren’s college tuitionpaymentsor living expenses from any required debt repayments, saysthe bankruptcy laws.
Parents who want their children to go to college are repeatedly admonished to plan far ahead. They should add bankruptcy to this planning, so their debts are discharged before they assist their college-bound children.
Before Congress passedthe 2005 reforms, the courts were split on interpreting bankruptcy law about whether supporting a child in college was a legitimate spending of money diverted from paying creditors. The 2005 changes had two provisions that directly affected this question.
First, educational expenses for children under 18 of about $1,500 per year were allowed. The courts ruled that this excluded any educational expenses for children over 18.
Second was the allowance of the expenses for elderly, chronically ill, or disabled members of one’s immediate family or of one’s household. The courts ruled that this shows a congressional intent to prohibit college tuition or support for children who were not chronically ill or disabled.
The application to children’s college expenses of athird provision of the 2005 reforms, for “special circumstances,” hasbeen uniformly rejected by the courts.
Married debtors filing by themselves must include their spouse’s income as if it were there own. They are allowed to deduct the separate expenses of the nonfiling spouse. Carmen Dellutri recently ponderedabout a nonfiling spouseclaiming a child’s college expenses as a Means Test separate expense. Would this be a nonfiling spouse’s separate expense,deductible from the Means Test’s Current Monthly Income? We don’t know.
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