Bankruptcy & Private School Issues

For a variety of reasons, many parents in the U.S. choose to send their children to private schools. It can be a good fit for some children, but it does come at a cost. These school costs can become an issue if one or both parents file for bankruptcy. While a lot will depend on your specific situation, it is important to be aware how bankruptcy courts view private school if you are seeking to discharge your debts.

Chapter 7 Filings

Those debtors wishing to file for bankruptcy under Chapter 7 may worry that private school education expenses may affect their eligibility to file for bankruptcy. Generally, the bankruptcy court does not consider private school a necessity and it may consider the funds spent on private school as disposable income which could keep you from qualifying for bankruptcy protection.

However, if you have a child with special needs or if you require daycare costs to be able to work or attend school, these costs will be allowed. For the purposes of eligibility for the bankruptcy means test, you may deduct reasonable educational expenses up to a certain amount (approximately $1,500.00 per child per year). So, don’t assume that if you have a child in private school, that it automatically disqualifies you from filing for bankruptcy.

Chapter 13 Filings

Normally, in a Chapter 13 filing, the debtor intends to pay back at least some of their debt. The amount of the payment depends largely on disposable income. Because of this, the debtor’s family finances are generally under stricter scrutiny than those of a Chapter 7 debtor, and in this context, expenses like private school tuition must be justifiable. Congress permits up to $1,500 per child per year to be allocated for educational expenses, but amounts over this may be deemed unreasonable.

There are many allowed ways to pay for private school without jeopardizing your bankruptcy. One way is to pay off 100% of your debt over 3 to 5 years. Another way is to budget your resources and to eliminate your unnecessary spending, such as fast food, Starbucks, etc. and spend those funds on private school tuition. There may be a compelling reason why public school is inadequate, such as a child’s disability. Alternatively, tuition in excess of $1,500 may also be seen as reasonable. Daycare costs are nearly always reasonable. If you are divorced, your child support payments can be used to pay for private school, especially if court-ordered.

Contact An Experienced Lawyer

Bankruptcy can be stressful. An experienced bankruptcy lawyer like Amy Goodblatt will help you find a way to live comfortably and still file for bankruptcy. She will explain how to retain your lifestyle and discharge your debts. The Orlando bankruptcy lawyers at the firm of Goodblatt · Leo are well versed in bankruptcy law and all its complexities, and are happy to help guide you through the process. Contact us today via our website or by telephone at 407-228-7007 to set up an initial appointment.