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Bankruptcy Clawback Lawsuits Over College Tuition Fees

April 20, 2016, Connecticut – Increasingly, many bankruptcy trustees are starting to sue universities in an effort to claw back tuition funds that had been paid years prior. According to the trustees, the parents (now filing for bankruptcy) should have put that money towards their growing debts, rather than towards the cost of rapidly increasing college tuition.

One of such recent cases included Robert and Jean DeMauro of North Haven, who made tuition payments for their daughter to attend Johnson & Wales University. Subsequently, in December 2014, the couple filed for bankruptcy and the Trustee is now seeking to get $46,909 back from the Rhode Island-based school, claiming tuition payments between 2011 and 2013 were fraudulent transfers as the Debtors received less than reasonably equivalent value in exchange. The case is currently pending in U.S. Bankruptcy Court for District of Connecticut, New Haven, A.P. no. 15-03011.

Villanova University, Ithaca College and the New York Institute of Technology are some of the other schools that have been sued by the bankruptcy trustees. Tuition-recovery lawsuits are a new phenomenon. Historically, tuition payments were so small that a trustee wouldn’t waste time pursuing them. But as college costs rise, it appears, such lawsuits will also be increasing in the times to come.

The claim against Johnson & Wales is slated to go to trial later this year in U.S. Bankruptcy Court in New Haven.