How Your Spouse’s Bankruptcy Affects Your Child’s Education

19 Mar How Your Spouse’s Bankruptcy Affects Your Child’s Education

If your spouse files for bankruptcy, will that affect your ability to pay for your children’s continuing education? It all depends on what level of education your children are attending.

The U.S. Bankruptcy Code specifically lets you use certain educational expenses as deductions on your means test. This means the money you spend on your child’s school and related expenses can serve to reduce the amount of money considered to be available to pay your creditors in bankruptcy. If you’re filing for Chapter 7 bankruptcy then that deduction may put you over the line to qualifying for Chapter 7, which is definitely a positive to some people.

If, however, you’re looking to file for Chapter 13 bankruptcy then the desireability of the limited educational deduction is turned around. The U.S. Bankruptcy Code allows a monthly deduction of up to $137.50 per child for attendance at a private or public elementary or secondary school. If only your spouse is filing the bankruptcy and your children’s school expenses exceed that amount then you can take the position that you, not your spouse, will be paying the difference.

Your spouse’s trustee, however, may not agree. If that happens then the additional money being spent on the education expenses would be up for grabs, and the Chapter 13 trustee may make a claim on what s/he considers to be additional disposable income.

When it comes to college-related expenses such as tuition, room, board, books and supplies the issue is even thornier. Often a trustee will not agree that the household efforts to put your kids through college should take priority over paying your spouse’s creditors. If that happens to you, it may be time for a heart-to-heart talk with your child while sitting in the financial aid office.

Ultimately, I don’t think a parent’s responsibility to giving their children the best education should be mandated by the bankruptcy court. If the schools in your area stink then you should have the ability to pay for a decent school. It’s probably cheaper than moving to some high-priced neighborhood in the best school district.

How about your thoughts? Should the child’s education come before the bankruptcy trustee’s drive to pay back creditors?

Image credit:alamosbasement/Flickr

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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