104 Iowa L. Rev. 2151 (2019)

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Abstract

Tuition clawback lawsuits are a relatively recent phenomenon in bankruptcy in which trustees are attempting to recover tuition that was paid to universities by insolvent parents for their adult children’s education. This Note contains an Appendix that catalogs 152 tuition clawback lawsuits to help examine and explain what is happening. Out of the cases that have been ruled on, courts have struggled with the question of whether tuition payments by insolvent parents are constructively fraudulent. More specifically, the main point of debate has been whether tuition paid by an insolvent parent for an adult child provides “reasonably equivalent value” to the debtor-parent(s). Based on an analysis of the facts of 152 tuition clawback lawsuits and the historical development of fraudulent transfer law, this Note concludes that tuition payments for an adult child do not provide reasonably equivalent value to their parents. Although this conclusion would resolve the current split on the question, it does not necessarily provide a solution that balances the rights of creditors with the rights of parents to help their children and the rights of universities to be protected. Thus, this Note proposes amendments to the Bankruptcy Code to better strike a balance between competing rights and policy considerations.