New York is home to a dizzying variety of private schools, so it’s common for debtors in New York bankruptcy whose children are enrolled in such institutions to ask whether they will be able to pay for their kids’ private school tuition. For those filing chapter 7, the answer ought to be fairly clear. Because chapter 7 is means tested, if parents could afford private schools before, they could through the bankruptcy. However, this situation probably does not describe the majority of households that pay for private education.
More commonly, these debtors will probably end up filing in chapter 13, which raises the question of whether private school tuition is an expenditure that reduces debtors’ disposable incomes. The answer for many private schools is no. Because the government provides education free of charge, the trustee and bankruptcy judge will probably see tuition charges for private education as discretionary expenditures. Debtors paying 100 percent repayment plans might still have enough disposable income available to cover private schools costs. Moreover, nothing in the Bankruptcy Code prevents relatives from paying for the kids’ tuition, and schools sometimes support parents who are working through a bankruptcy.
One place where parents might have some luck is if they are sending their kids to parochial schools. Section 1325(b)(2)(A)(ii) of the Bankruptcy Code defines “disposable income” to exclude up to 15 percent of a debtor’s gross income for that year on “amounts reasonably necessary to be expended” on charitable contributions to religious institutions as defined by the Internal Revenue Code. Debtors might be able to argue that their tuition payments for their children fall into this category and should be excluded from their disposable income that would otherwise be paid to their creditors in chapter 13.
This rule is meant to allow debtors to give tithes and other donations to religious organizations, so school tuition might not technically qualify. Nevertheless, the best way to keep a child from transferring to a public school would be to consult with the school’s administrators and candidly discuss if it will accept a tithe or donation instead of regular tuition. Planning this before filing bankruptcy can improve the odds of successfully convincing the trustee, bankruptcy court, and other creditors of the importance of keeping children in a parochial schools.
If you are considering how to pay for private school tuition when facing financial difficulties, then you should discuss your situation with an experienced New York bankruptcy lawyer to help evaluate your options and possibly generate other ones.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.
