Adult Child’s Tuition Payments Avoidable as Fraudulent Transfers

By: Gregory R. Bruno

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In Gold v. Marquette (In re Leonard),[1] the United States Bankruptcy Court for the Eastern District of Michigan held that college tuition payments could be recovered as constructively fraudulent transfers because the debtors did not receive “reasonably equivalent value” for pre-petition payments made to Marquette University (“Marquette”) on their adult son’s behalf.  In 2008, the debtors paid Marquette $21,527 to cover the rest of their son’s tuition and related expenses.[2]  The chapter 7 trustee sought to avoid and recover these payments as fraudulent transfers.[3]  Marquette moved for summary judgment on the ground, inter alia, that the debtors received reasonably equivalent value for these payments because the debtors received two benefits from such payments: (1) peace of mind in knowing that their son was receiving a quality education, and (2) the expectation that their son would become financially independent from them because of such education.[4]

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