Court Dismissed Trustee’s A.P. for Fraudulent Transfer Against University Since Proceeds of Parent PLUS Loans were Not Property of the Debtor that was Available for the Benefit of Creditors

Court Dismissed Trustee’s A.P. for Fraudulent Transfer Against University Since Proceeds of Parent PLUS Loans were Not Property of the Debtor that was Available for the Benefit of Creditors

On December 1, 2015, the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On July 19, 2017, the Trustee initiated this Adversary Proceeding against the University and asserted the following causes of action: (1) Constructive Fraudulent Transfer, pursuant to 11 U.S.C. §§ 548(a)(1)(B), 550 and 551; and (2) UFTA Constructive Fraudulent Transfer, pursuant to 11 U.S.C. § 544(b)(1) and state law.

On December 7, 2017, the University filed the Motion to Dismiss and accompanying Memorandum of Law. On January 12, 2018, the Trustee filed the Opposition. On January 19, 2018, the University filed a reply.

In his Complaint, the Trustee alleges that the Debtor is the parent of Alexander, who, at all relevant times, was over the age of 18 years. He alleges that between September of 2013 to October of 2014, when Alexander was a student at the University, the Debtor made a number of transfers to the University by means of a Federal Direct Parent PLUS loan (“Parent PLUS Loan”) to pay for Alexander’s tuition. The Trustee claims that these payments constitute constructive fraudulent transfers, pursuant to the Bankruptcy Code. He seeks that the total of $66,616.00 be avoided and/or set aside and recovered for the benefit of the Debtor’s estate.

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