Trustee’s Complaint for Fraudulent Transfer Against University for Tuition Paid by Debtors for Daughter Dismissed

Trustee’s Complaint for Fraudulent Transfer Against University for Tuition Paid by Debtors for Daughter Dismissed

For all times relevant for this action, the Debtors’ daughter, was more than 18 years old.  She was a student at  University from August 2011 to August 2014. The plaintiff alleges that for that entire period, the Debtors had “unreasonably small capital to operate” and “were unable to pay their debts as they became due.”  The plaintiff alleges that the Debtors paid Catholic University $64,845.50 for Julia’s tuition between September 2011 and June 2014. They paid $30,659.50 of this amount between September 2013 and June 2014. Nevertheless, the plaintiff alleges that at the time of these payments, the debtors “were engaged in a business or transaction, or were about to engage in a business or transaction, for which any property remaining with [them would have been] an unreasonably small amount of capital” and that they “intended to incur, or believed that they would incur, debts that would be beyond their ability to pay as such debts matured.”

On August 24, 2015, the Debtors filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code. The plaintiff, as the trustee for the debtors’ estate, has sued  University for the amount the debtors paid in tuition during the two-year period prior to filing for bankruptcy under the United States Bankruptcy Code and the prior four-year period under the Connecticut Uniform Fraudulent Transfer Act. He alleges that the debtors received “less than [the] reasonably equivalent value” in exchange for these payments and that the payments therefore were “constructively fraudulent transfers.”

 

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