Debtor’s Pre-Petition Tuition Payments for Minor Child were Not Fraudulent Transfers

Debtor’s Pre-Petition Tuition Payments for Minor Child were Not Fraudulent Transfers

The Debtor filed a Chapter 7 petition in 2014. About two years later, the Trustee commenced this adversary proceeding against Trey Whitfield School by filing a complaint to avoid and recover tuition payments that the Debtor made to the School for the school years beginning in 2011, 2012, and 2013. The Trustee claims that he may avoid and recover these tuition payments as constructive and intentional fraudulent transfers under Bankruptcy Code Sections 548, 550, and 551 and  State Law, and also that they can be recovered from the School under a common law theory of unjust enrichment.

The Trustee alleges that before this bankruptcy case was filed, the Debtor sent her three minor children to Trey Whitfield School, an independent school, and that she made tuition payments to the School in consideration for her children’s education and care for the academic years beginning in 2011, 2012, and 2013. From September 1, 2011 until June 4, 2014, when one of her minor children was younger than age nine, the Trustee alleges that Ms. Michel made tuition payments totaling $15,385 to Trey Whitfield for the child’s education.

The Trustee alleges that between September 2011 and June 2014, the Debtor made transfers in the form of tuition payments to Trey Whitfield totaling $45,880 (the “Transfers”). The Trustee also alleges that between July 5, 2012 and July 4, 2014, she made transfers in the form of tuition payments to Trey Whitfield totaling $30,190 (the “Two-Year Transfers”).

In its Motion to Dismiss, Trey Whitfield argues that the Amended Complaint should be dismissed because these tuition payments were made for “a legal necessity,” that is, the education and care of the Debtor’s children. The School also argues that as a parent, the Debtor received value because she satisfied her legal obligation to educate and care for her minor children. Trey Whitfield urges that by satisfying these legal duties as a parent, the Debtor “should be presumed to have received reasonably equivalent value,” which “overcomes the notion of an intentional fraudulent conveyance.” For these reasons, among others, Trey Whitfield asserts that the Trustee does not plead facts sufficient to state plausible claims, and that the Amended Complaint should be dismissed.

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