Can I Support My College Age Children and Still File Chapter 7?

29 Jun Can I Support My College Age Children and Still File Chapter 7?

Will a Chapter 7 debtor be denied a discharge because he includes a budget allocation for college tuition, rent and car payments for his two college aged children?

In a case decided by Judge Homer Drake of the Northern District of Georgia, the answer is “yes” – discharge denied. In the Walker case, Judge Drake had before him a case that included:

  • $309 for son’s car payment
  • $430 per month for other son’s truck payment
  • $66 per month for child’s car insurance
  • $800 to $1,400 per semester for books
  • $120 for month for two cell phones
  • $300 per month for rent
  • $500 per month for spending money

After considering the “totality of the circumstances,” Judge Drake wrote:

it appears to the Court that the Debtors simply reordered their priorities once their two oldest children reached college age. The Debtors have re-directed their income to enable them to provide Timothy and Matthew with cell phones, spending money, book money, rent assistance, vehicles, and car insurance. The Court is not implying that supporting college-age children is not admirable when parents have the means to do so. However, the Court agrees with its learned colleagues that supporting adult children at the expense of unsecured creditors is not permissible.

I think we can glean two things from this ruling.  First, the debtors in this case were pushing the envelope.   Good judges seek to find a balance between legitimate rights of debtors to a discharge and fresh start, and the rights of creditors who are not getting paid.   This is the type of case that will be cited by banks and creditor advocates to demonstrate the greed and unreasonableness of debtors.

Second, Judge Drake’s conclusions should not be news to the debtor.  There are numerous cases in the 11th Circuit in which judges have denied discharge because the debtor’s support of an adult child used up financial resources that could have gone to Chapter 13.

Your bankruptcy can negatively affect your children as the courts look very narrowly at what constitutes necessary expenses.  I have argued – sometimes with success and sometimes without – that private school tuition for minor children is necessary.  The point here – before you file, think carefully about what you consider to be a necessity and what you consider to be optional.  Talk to your lawyer and try to identify any potential areas of conflict before you file.

Thanks to my colleague Scott Riddle and his Georgia Bankruptcy blog for highlighting this case.

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Jonathan Ginsberg, Esq.

I represent individuals in Chapter 7 and Chapter 13 cases filed in the Northern District of Georgia, which includes Atlanta, Newnan, Gainesville and Rome. I publish several informative web sites, including https://www.atlanta-bankruptcy.com and an Atlanta bankruptcy blog, https://www.thebklawyer.com/thebkblog. Please mention Bankruptcy Law Network when you call.
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