Filing bankruptcy isn’t just for low-income debtors. As a matter of fact, it’s the high-income debtors who most benefit from a bankruptcy filing because they have assets that they need to protect from creditors. That said, if you’re a high-income debtor with a child in private school you may be concerned that you will be forced to disenroll them. There are a few things you need to know.

Necessity vs. Luxury

When you file Chapter 13 bankruptcy, the bankruptcy court requires that you use all of your disposable income to repay debtors.  And a bankruptcy trustee can’t justify allowing a bankruptcy debtor to pay for an expensive private school for a child if it isn’t necessary.  This is an important distinction—the bankruptcy trustee may allow for private school tuition as part of a bankruptcy debtor's expenses IF the private school is a necessity. For example, if you have a special needs child who must be trained at a private school to get their needs met then private school tuition may be considered a necessity not a luxury. Let’s take a look at a few reasons for private schooling that a bankruptcy trustee may not consider a necessity:

• That’s where all your child’s friends A bankruptcy trustee won’t approve a private school tuition fee just because your child is accustomed to attending a certain school. If there is a free public school available and you’re a bankruptcy debtor who is seeking to discharge some or all of their unsecured debts, the trustee will expect you to forgo paying private school tuition and send your child to a public school if necessary to pay your debts.

• Your adult child is in college. It’s not likely that a bankruptcy trustee will approve of a private school tuition fee for your adult college-age child. Since bankruptcy requires a debtor to commit all of their disposable income to repaying debts, a college education for your child won’t be considered a necessary expense.

• You paid for private school right before you filed for bankruptcy. Paying for your child’s private school tuition right before filing bankruptcy is a mistake. If you withdrew cash assets to pay tuition instead of paying your debts, the bankruptcy trustee may consider that an illegal transfer of assets and demand that the money is returned to the bankruptcy courts to repay creditors.

Other Options

If sending your child to private school despite your bankruptcy filing is important to you, there are some other options you may want to discuss.

• The bankruptcy court allows you to pay 15% of your income to tithes. It’s possible (but not guaranteed) that a bankruptcy trustee might consider private tuition as legitimate in your case if it is for a parochial school and is 15% or less of your income. This is something you may need to discuss with your bankruptcy attorney as each jurisdiction is different in how bankruptcy trustees may handle this situation.

• You may also consider allowing someone else to pay for your child’s private education. There is often financial aid and sometimes friends or family may be willing to help you pay for the tuition if you explain your financial situation.

If you’re considering bankruptcy and your child is currently enrolled in a private school, carefully consider your options and discuss with a bankruptcy attorney.