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New Cases and Developments

NACUA's Legal Resources staff summarizes current higher education cases and developments and provides the full text of selected cases to members. New cases and developments are archived here for up to 12 months.  Cases provided by Fastcase, Inc.

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Financial Aid; Bankruptcy & Student Debt; Students

Novak v. Univ. of Miami (Bankr. Conn. Feb. 27, 2018)

Memorandum of Decision granting Defendant’s Motion to Dismiss. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against the University of Miami to recover tuition payments (totaling $66, 616) made by Debtor, the parent of a University of Miami student, pursuant to a Federal Direct Parent PLUS loan. Plaintiff argued that the payments were constructive fraud transfers because they constituted “an interest of the debtor in property,” under the Bankruptcy Code and similar provisions of the Connecticut Uniform Fraudulent Transfer Act (CUFTA). Looking to the federal and statutory framework of Parent PLUS loans, as well as the holdings of Eisenberg v. Pennsylvania State University and Shapiro v. Gideon, the court found that the Debtor never had an “interest” in the Parent PLUS loans since she lacked possession or control of the funds. Further, the court found that the loan proceeds “could not have been available in any circumstance to pay [the debtor’s creditors],” thereby concluding that such a finding comported with the “spirit and purpose of fraudulent transfer provisions in the Bankruptcy Code and CUFTA.”

3/2/2018
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Students; Bankruptcy & Student Debt; Financial Aid

Boscarino v. Ithaca College (Bankr. Conn. Feb. 27, 2018)

Memorandum of Decision granting the Defendant’s Motion for Summary Judgment. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Ithaca College to recover tuition payments made pursuant to a Federal Direct Parent PLUS loan. Finding Eisenberg v. Pennsylvania State University and Novak v. Univ. of Miami dispositive on the matter, the court held that the Parent PLUS loan payments were not part of the Debtor’s estate, either “prior to the filing of her bankruptcy petition” nor would they “have been available for distribution to her creditors at that time,” and therefore were not fraudulent transfers to Ithaca College.

3/2/2018
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Bankruptcy & Student Debt; Students

Chorches v. The Catholic University of America (D. Conn. October 16, 2017)

Order granting Defendant’s Motion to Dismiss. Plaintiff, a trustee of the bankruptcy estate of the Franzese family, alleged that the Franzeses fraudulently transferred funds to Catholic University as payments for their daughter’s tuition in an effort to deter or hinder collection by their creditors. For a successful fraudulent transfer claim, Plaintiff had to prove that the Franzese family was insolvent on the date of the transfer or became insolvent as a result of the transfer, and that Defendant received less than a reasonably equivalent value for the good or service offered. The court found that Plaintiff failed to plead facts showing that the Franzeses were financially distressed when they made the alleged payments and therefore, Plaintiff could not prove that the Franzeses were insolvent on the date of the transfer or became insolvent as a result of the transfer. 

10/18/2017
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Financial Aid; Bankruptcy & Student Debt; Students

Hugh Lawrence Brooks v. University of Maryland, et al. (Bankr. S.D. Ind. September 14, 2017)

Order granting Defendant’s Motion to Dismiss or in the Alternative, for Summary Judgment. Plaintiff sought to discharge his student loan debt from the University of Maryland for undue hardship. The court found that Plaintiff could not meet the burden of proving undue hardship because he was the only member of his household, had net annual earnings of over $110,000, and by his own admission acknowledged that “his income and expected future income is and will be adequate for him to afford the basic necessities of life.”

9/20/2017
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Bankruptcy & Student Debt; Students

Amicus Brief in DeGiacomo v. Sacred Heart University, Inc. (July 19, 2017)

Amicus brief by the American Council on Education (ACE) and nineteen other higher education associations to the U.S. Court of Appeals for the First Circuit in support of Sacred Heart University in the tuition claw-back case, DeGiacomo v. Sacred Heart University, Inc. The key issue in the case asks whether a bankruptcy trustee can recover tuition and other education-related payments made to institutions by parents on behalf of their children. Trustees claim that because the parents were insolvent at the time they made the payments and received less than “reasonably equivalent value” for their children’s education, the payments were fraudulent. Amici argue that the trustees have misread the relevant bankruptcy statute and “ignored the very real direct and indirect value that parents receive when they pay for their child’s college education.” 

7/21/2017
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Financial Aid; Bankruptcy & Student Debt; Students

Final Rule on Partial Delay of Effective Dates for Financial Assistance Regulations (June 13, 2017)

Unpublished Final Rule issued by the U.S. Department of Education’s Office of Postsecondary Education announcing a delay in the effective dates for certain financial assistance regulations. These regulations include the borrower defense regulations published on November 1, 2016 (81 Fed. Reg. 75926), which establish new federal standards and processes for determining when a student loan borrower can have his loan repayments discharged due to an institution’s acts or omissions and prohibit the use of certain dispute-resolution contractual provisions for loans under the Direct Loan Program. The regulations were set to go into effect on July 1, 2017, but have been delayed because of pending litigation against the Department challenging the regulations. 

6/14/2017
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