Cai #1 presentacion final

COLLEGE TUITION PAYMENTS AS FRAUDULENT
TRANSFERS, AND THE PRICE EDUCATION HAS TO PAY
Stephanie Patton
I. INTRODUCTION
Be just before you are generous.1 That is the seminal maxim

that every bankruptcy, fraudulent transfer, and debtor-creditor
rights scholar knows and lives by. But what exactly does it mean
to be just? To whom is justice owed?
This comment explores the meaning of justice in a relatively
undeveloped area of the law. The focus is on the unique situation
that occurs when parents save to pay for their children’s tuition at
an institution of higher education—something so deeply
entrenched as part of the American dream—and subsequently end
up needing to file for bankruptcy. In this situation, bankruptcy
trustees have been seeking to avoid the tuition payments as
fraudulent transfers2 if the payments have been made within the
statutory reach-back period. Courts most often look to see whether
the debtor parent received reasonably equivalent value in return for
the payment of their child’s tuition; if reasonably equivalent value
has been received, the payment will not be avoided as a fraudulent
transfer.
Since the turn of the 21st century, the courts have begun
seeing more and more of these cases, where a debtor parent has
made payments to a university or college on their child’s behalf
and has subsequently, and soon after, filed for bankruptcy. Courts
have reached varying outcomes, typically applying the reasonably
equivalent value analysis, but also more recently looking to other
1
The maxim appears time and time again in creditors’ rights cases. For an
early American reference to the phrase as a “maxim,” see Walker v. Loring, 36
S.W. 246, 247 (Tex. 1896).
2
Although the term “voidable transaction” has become the most recent
name for a transfer that is voidable as constructively fraudulent, history has also
known these transactions as “fraudulent transfers” and “fraudulent
conveyances.” This comment uses the more widely known term, “fraudulent
transfer.”
331
332 WIDENER COMMONWEALTH LAW REVIEW [Vol. 30
sections of the Bankruptcy Code to apply—relative to the

circumstances of tuition payments—what seem to be
conspicuously value-driven tests as well. The issue becomes
whether these tuition payments should really be avoidable at all, or
whether they should be altogether exempt from the trustees’ reach.
In order to understand the background of the issue, this
comment will provide a brief introduction to both fraudulent
transfer and bankruptcy law. Recovery of tuition payments made
by debtor parents lies directly at the intersection of these two
bodies of law, often implicating both federal and state concerns.
As such, it is important to have a basic understanding of the
relevant parts of both bodies of law as they relate to the context of
this comment.
Next, this comment will explore tuition payments specifically.
First, it will look at a background of the reasonably equivalent
value analysis. It will then examine several specific cases where
courts have reached different outcomes on very similar facts.
Then, it will look at recent analyses to determine whether there is a
trend towards one result or the other, and try to glean what the
courts’ general attitude is toward whether tuition payments made
by debtor parents should be subject to avoidability.
This comment will then explore the policy behind the
decisions that are being handed down by the courts. The aim of
this comment is to utilize a rights-focused approach, with the
understanding that there are many competing rights at play, no one
less important than the next. It is important to look at creditors,
debtors, students, and colleges to determine which rights each
party has in these situations. Furthermore, and of paramount
importance, is the examination of the right to education, and the
role that education plays in the American society. By exploring
and understanding the competing rights, this comment hopes to
determine a way ahead that will best balance those rights.
Lastly, this comment will propose the way forward. Although
there are many possible outcomes and this area of law is only in its
infancy relative to other bodies of law, a uniform and consistent
approach across jurisdictions must be sought. Several law students
and other scholars have written on the topic, and most have
2021] TUITION PAYMENTS: FRAUDULENT TRANSFERS? 333
proposed that the Bankruptcy Code be amended to exclude tuition

payments from the trustees’ reach.3 This comment seeks to expand
beyond suggesting an amendment to the Bankruptcy Code to
impress the importance of why an amendment is appropriate at all.
All of the affected parties could better protect themselves if they
had an understanding of how their rights will be affected in an
avoidance action by a bankruptcy trustee in this type of situation.
The uniqueness of this situation expands beyond the specific
factual scenario to the many parties and fundamental societal
interests involved, far more than a typical debtor-creditor rights
dispute. Again, the question becomes to whom is justice owed? Is
justice owed to the creditor? The debtor? The university? The
student? Society itself?
II. HISTORY OF FRAUDULENT TRANSFERS
The goal of this analysis is to understand the implications that

arise when a parent pays for their child’s tuition at a higher
education institution and soon after, files for bankruptcy.
However, as rooted as this issue is in bankruptcy law, it is even
more so fundamentally rooted in fraudulent transfer law. As such,
a brief glimpse into the history of fraudulent transfers and how the
state of law developed as it stands today is first helpful. Even
more helpful is an explanation of how a fraudulent transfer arises.
Fraudulent transfer law allows creditors or a bankruptcy
trustee “to set aside transfers that place the debtor’s property out of
the reach of creditors and thereby hinder” the creditors’ efforts to
3
Alexis Gebhardt, Closing the Loophole: Bankruptcy Trustees Attempt to
Claw Back Tuition Payments from Colleges and Universities, 3 BUS. & BANKR.
L. J. 319 (2016); Michael R. Herz, A Parent’s Quid Pro Quo, 38 AM. BANKR.
INST. J. 38 (2019); Derek A. Huish, Clawing Back Tuition Payments in
Bankruptcy: Looking to Ancient and Recent History to Define the Future, 104
IOWA L. REV. 2151 (2019); Jenna C. MacDonald, Out of Reach: Protecting
Parental Contributions to Higher Education from Clawback in Bankruptcy, 34
EMORY BANKR. DEV. J. 243 (2017); Andrew Mackenzie, The Tuition “Claw
Back” Phenomenon: Reasonably Equivalent Value and Parental Tuition
Payments, 2016 COLUM. BUS. L. REV. 924 (2016); Jeana K. Reinbold, Recovery
of the Payment of Tuition as a Fraudulent Transfer: The Struggle to Quantify an
Economic Benefit, 2016 ANN. SURV. OF BANKR. L. 11 (2016).
collect payment.4 Generally, this area of the law aims to “protect

creditors from transactions which . . . unfairly drain[] the pool of
assets available to satisfy creditors’ claims, or which dilute
legitimate creditor claims at the expense of false and lesser
claims.”5 Historically rooted and “elaborately developed in
Roman law,” fraudulent transfers and their legal implications have
predated even some of the most fundamental areas of law.6
As previously noted, fraudulent transfers have taken several
names since their inception, including fraudulent conveyances,
voidable transactions, and voidable transfers.7 Each name,
however, is a matter of semantics and the changes simply indicate
an intent not to mislead.8 The presently used name, voidable
transactions, was adopted by the Uniform Voidable Transactions
Act (UVTA) in 2014, but it is simply “a mere shift in terminology
that has no substantive effect,” and the more commonly known
term is fraudulent transfer.9 At their core, fraudulent transfers are
those transactions in which a debtor transfers property with the
intent or effect of preventing a creditor, often with superior rights
to the property, from reaching that property to satisfy a debt owed
to that creditor.10
In order to understand the significant place of fraudulent
transfers in a bankruptcy trustee’s attempt to recall tuition
payments that are allegedly voidable, it is helpful to understand the
evolution of this body of law. The “primordial rule” of fraudulent
transfer law is that any transfer of property by a debtor made with
4
CHARLES J. TABB, LAW OF BANKRUPTCY, 572 (4th ed. 2016).
5
5 COLLIER ON BANKRUPTCY, ¶ 548.01 (16th ed. 2019).
6
Kenneth C. Kettering, The Uniform Voidable Transactions Act; or, the
2014 Amendments to the Uniform Fraudulent Transfer Act, 70 BUS. LAW. 777,
778 (2015) (explaining that the English common law developed from the Roman
law, and that American law is based heavily on England’s interpretation of
Roman law in England’s codification of the Statute of 13 Elizabeth).
7
Id. at 780.
8
Id. at 806.
9
Id.
10
Yaesu Electronics Corp. v. Tamura, 33 Cal. Rptr. 2d 283, 286 (Cal. Ct.
App. 1994).
“intent to hinder, delay, or defraud” a creditor is voidable.11 This

living law has been codified in the United States in several
iterations, with major codifications occurring in each generation of
the last century.12
The first major codification occurred with the Uniform
Fraudulent Conveyance Act (UFCA), which was developed and
promulgated by the National Conference of Commissioners on
Uniform State Laws, now known as the Uniform Law
Commission.13 This took place in 1918, and the UFCA was well-
received and widely enacted.14 The UFCA was enacted in
response to confusion in courts’ application of the traditional
“badges of fraud,” facts which make a transaction suspicious and
warrant an explanation, but went further than the prior body of law
by creating “presumed” fraudulent transactions—those
transactions in which debtors make what are perceived as transfers
for less than fair consideration and thereby unjustly and negatively
impacting creditors.15 These presumed fraudulent transactions
gave rise to what are now known as constructively fraudulent
transfers and are the basis for most bankruptcy trustees’ tuition
payment avoidance actions.16
The last major codification took place in 2014 with the now
current Uniform Voidable Transactions Act (UVTA).17 A subtle,
yet clarifying and important change in the UVTA is the renaming
of the Act, changing from the Uniform Fraudulent Transfer Act to
the Uniform Voidable Transactions Act.18 As previously
mentioned, this change is largely one of terminology and not
substance.19 As commonly understood, fraud in its modern sense
“is not, and never has been, a necessary element” in a successful
11
Kettering, supra note 6 (noting that American law retained the
primordial rule of England’s Statute of 13 Elizabeth in Twyne’s Case, which
remains a staple of fraudulent transfer law in America).
12
Id. at 778-79.
13
Id. at 779.
14
Id.
15
COLLIER, supra note 5, at ¶ 548.01.
16
Id.
17
Kettering, supra note 6, at 779.
18
Id. at 806.
19
Id.
avoidance claim.20 The “primordial rule” which prescribes

avoidance of a transfer made with intent to “hinder, delay, or
defraud creditors” does not require any proof of fraudulent intent.21
As will be explained, any transfer that hinders or delays creditors
may be subject to avoidance, even if there is no evidence that the
creditors were defrauded.22
This type of transfer is known as constructive fraud, and the
transfer may be avoided “whether or not the debtor subjectively
had a wrongful intent.”23 This is an important consideration to
keep in mind, especially given the emotionally charged
circumstances that this comment covers. It is paramount that
readers, attorneys, and commentators alike all understand that a
trustee may seek to avoid a tuition payment as a fraudulent transfer
even if there was no evidence of actual fraud. The aim of
fraudulent transfer doctrine is to “polic[e] conduct to the prejudice
of creditors[,]” whether or not that conduct was actually
fraudulent.24 Allegedly constructive fraud is what gives rise to the
subject of this comment, with trustees arguing that debtors failed to
receive fair consideration rather than that the debtors harbored any
wrongful intent.
As noted, a fraudulent transfer may be wrought with actual
and intentional fraud, or it may be constructively fraudulent.25
Traditional, intentional fraud is evaluated based on the transferor’s
intent and is often proven by circumstantial evidence.26 This
subjective intent to “hinder, delay, or defraud,”27 however, is not a
requirement for constructive fraud. In section 548(a)(1)(B) of the
United States Bankruptcy Code, a constructively fraudulent
transfer occurs if the trustee is able to prove that the debtor did not
receive reasonably equivalent value for the transfer and that the
debtor meets one of several conditions, most importantly being
20
Id.
21
Id. at 807.
22
Id.
23
TABB, supra note 4, at 572.
24
25
11 U.S.C. 548(a)(1)(A)-(B).
26
Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 567 B.R. 55, 117
(Bankr. S.D.N.Y. 2017).
27
§ 548(a)(1)(A).
insolvent on the date of the transfer or becoming insolvent as a

result of the transfer.28
As will later be explained in detail, the courts must determine
what constitutes reasonably equivalent value, and the meaning of
this can be murky. Courts generally agree that reasonably
equivalent value need not be exact, however, but expect that the
benefits that the debtor received at least “approximate” the costs.29
Importantly, it is worth again noting that there is no actual fraud
required in a constructively fraudulent transfer; simply, the debtor
did not receive enough value to warrant the transfer and likely was
insolvent when it was made. The trustee bears the burden of
proving a constructively fraudulent transfer by a preponderance of
the evidence.30
Tuition payments are generally challenged by the trustee
under a constructive fraud theory, and the ramifications of proving
that a tuition payment was a constructively fraudulent transfer are
important. The Bankruptcy Code explicitly allows the trustee to
avoid a constructively fraudulent transfer.31 Similarly, the UVTA
permits avoidance of a constructively fraudulent transfer with the
creditor’s remedy being a judgment against the transferee of the
asset.32 These remedies set up a myriad of problems for the
transferees of tuition payments—usually, the institutions of higher
education.
There is an exception to fraudulent transfer law that is worthy
of noting. In both the Bankruptcy Code and the UVTA, neither the
bankruptcy trustee nor a creditor may recover from a subsequent
transferee.33 In the Bankruptcy Code, a subsequent transferee is a
transferee that “takes [from the initial transferee] for value . . . , in
28
Id.; see also In re Lyondell Chem. Co., 567 B.R. at 109 (explaining that
in addition to proving that the debtor received less than reasonably equivalent
value, the trustee must also prove that the debtor had “(i) balance-sheet
insolvency, (ii) unreasonably small capital, [or] (iii) the intent to incur debts
beyond the debtor’s ability to pay the debts.”).
29
In re Lyondell Chem. Co., 567 B.R. at 114.
30
Id. at 108.
31
§ 548(a)(1)(B).
32
UNIF. VOIDABLE TRANSACTIONS ACT §§ 4(a)(2), 8(b)(1) (UNIF. L.
COMM’N 2014).
33
See § 550(b); UNIF. VOIDABLE TRANSACTIONS ACT § 8(a).
good faith, and without knowledge of the voidability of the

transfer . . . .”34 In the UVTA, if the initial transferee of a debtor's
payment has transferred the payment to a subsequent transferee
who took for value, in good faith, and without knowledge, the
payment will not be voidable by the bankruptcy trustee or
creditor—even if the debtor did not receive reasonably equivalent
value.35 In the context of this comment, although most courts have
focused on whether a debtor parent received reasonably equivalent
value in return for a tuition payment, some courts have begun
focusing on whether the college is an initial or subsequent
transferee.
III. HISTORY OF RELEVANT BANKRUPTCY LAW
In order to understand the importance of the issue at hand, a

brief glimpse into the history of bankruptcy law is also helpful. As
with any good grasp on history, the analysis begins with the policy
and the underlying interests that led to that history. The purpose of
bankruptcy is to “mitigate the effects of financial failure.”36 The
“fresh start” policy, a longstanding tradition in American
bankruptcy law promulgated by the United States Supreme Court,
seeks to allow debtors to start anew by “mak[ing] peace with their
creditors” and moving forward unencumbered by pre-existing
debts, subject to some exceptions.37 Just as much as bankruptcy
law seeks to grant a debtor a fresh start, it also seeks to balance
creditor interests by providing an equitable distribution of what
remains of the debtor’s estate.38 At its heart, bankruptcy law
34
§ 550(b)(1).
35
UNIF. VOIDABLE TRANSACTIONS ACT § 8(a).
36
1 COLLIER ON BANKRUPTCY ¶ 1.01 (16th ed. 2019).
37
Grogan v. Garner, 498 U.S. 279, 286-87 (1991) (explaining that
Congressional intent was to exclude certain categories of debt from discharge,
including child support, alimony, student loans, and taxes; further, holding that
Congress would have favored the interests of victims of fraud over an interest in
allowing a perpetrator of fraud to achieve a fresh start through bankruptcy).
38
See COLLIER, supra note 36, at ¶ 1.01.
requires the trustee, through its fiduciary obligations, to conserve

the estate’s assets and maximize creditor distributions.39
This comment is focused on a very narrow aspect of consumer
bankruptcy, and more specifically, bankruptcy of debtor parents
who have made tuition payments on behalf of their children. For
that reason, the cases involved will typically be in a Chapter 7 or
Chapter 13 context.40 The Bankruptcy Code is housed in Title 11
of the United States Code, and within Title 11, there will be several
sections most applicable to the context of this comment.41
A Chapter 7 bankruptcy consists of a liquidation of the
debtor’s assets to pay pre-existing debts.42 In a Chapter 7 case, the
trustee is responsible for collecting and reducing the property of
the estate to money which will be distributed to satisfy the debts of
the debtor.43 A Chapter 13 case, on the other hand, reorganizes the
debtor’s debts into a payment plan under which the debtor satisfies
the payments in the plan and subsequently receives a discharge of
all debts provided for by the plan.44 Both Chapter 7 and 13
bankruptcy proceedings include the appointment of a trustee to
manage the bankruptcy estate, and it is this trustee that will
challenge any tuition payments that the trustee may see as
constructively fraudulent.45 It is a trustee’s duty in bankruptcy to
maximize the value of the estate, being “vigilant and attentive in
advancing the estate’s interests[,]” with a duty to both the debtor
and his or her creditors to “realize from the estate all that is
possible for distribution among the creditors.”46 It makes sense,
then, that the trustee would seek to avoid any payments or transfers
39
Ngan Gung Rest., Inc. v. Off. Comm. of Unsecured Creditors of Ngan
Gung Rest., Inc. (In re Ngan Gung Rest., Inc.), 254 B.R. 566, 577 (Bankr.
S.D.N.Y. 2000) (citing inter alia In re Rigden, 795 F.2d 727, 730 (9th Cir.
1986)).
40
See generally 2 COLLIER ON BANKRUPTCY ¶ 109 (16th ed. 2019).
41
See generally 11 U.S.C.
42
See 11 U.S.C. §§ 701-84.
43
§§ 704(a)(1), 726.
44
11 U.S.C. §§ 1321, 1322, 1328.
45
See §§ 704, 1302.
46
Nelson v. A-C Prod. Liab. Trust, 549 B.R. 87, 98 n.9 (citing In re
Martin, 91 F.3d 389, 394 (3d Cir. 1996)).
of money that it could prove were actually or constructively

fraudulent.
While it is key to remember that fraudulent transfers arise in
both the Bankruptcy Code and in state fraudulent transfer laws,
there are some sections of the Bankruptcy Code that are most
commonly seen in these scenarios.47 Section 548 is by far the most
important for purposes of this comment because it provides the
basis of most arguments challenging a tuition payment made by a
debtor parent.
Section 548 of the Bankruptcy Code provides that a trustee
“may avoid any transfer” of a debtor’s property interest or
obligation incurred by the debtor if that transfer or obligation “was
made or incurred on or within [two] years before the date” the
debtor files their petition if the debtor has done certain things.48
For the purposes of this comment, not all of the possibilities will
be relevant, but key to the issue is Section 548(a)(1)(B), which
provides that a transfer may be avoided if the debtor “received less
than reasonably equivalent value in exchange for such transfer”
and either was insolvent when the transfer was made or became
insolvent as a result of that transfer, or believed or intended to
incur debts that would be beyond the debtor’s ability to pay.49
Section 548 also contains a provision allowing a trustee to avoid a
transfer if it was made within the two-year time frame described
above and was made with the “actual intent to hinder, delay, or
defraud” a creditor.50 Though both of these provisions may arise
in the realm of tuition payments, the far more common is the
reasonably equivalent value argument, and this is where courts
diverge the most. In fact, that the debtor received less than
47
48
11 U.S.C. § 548(a)(1).
49
§ 548(a)(1)(B). The statute notes other circumstances in which a debtor
may be subject to having their payments avoided; however, these are irrelevant
for purposes of this comment. These include having received less than
reasonably equivalent value and also either being engaged in or about to be
engaged in a business or transaction for which any property remaining with the
debtor was unreasonably small capital, or making the transfer to or for the
benefit of an insider, under an employment contract and not in the ordinary
course of business.
50
§ 548(a)(1)(A).
reasonably equivalent value in exchange for a transfer made is “[a]

required showing [in] almost every type of constructive fraud
action,” whether federal or state-based.51
Section 544 of the Bankruptcy Code is also applicable. This
section allows a trustee to invoke and utilize state law to avoid a
fraudulent transfer.52 Specifically, Section 544(b)(1) provides that
a trustee may avoid any transfer or obligation made or incurred by
the debtor “that is voidable under applicable [state] law by a
creditor holding an unsecured claim . . . .”53 This is critical
because it allows the trustee to utilize a longer time frame if the
state’s fraudulent transfer laws so prescribe. In other words, the
trustee has the choice of whether to use Section 548 of the
Bankruptcy Code, or the state’s fraudulent transfer law, whichever
is more beneficial to their cause.54 Often, a state’s statutory period
is longer than the Bankruptcy Code’s, leading a trustee to utilize
Section 544 to invoke state law rather than invoking a claim under
the Bankruptcy Code.55
A. The Charitable Contribution Exception

Interestingly, and as will prove to become more relevant,
Section 544(b)(2) of the Bankruptcy Code provides that a trustee
may not use this section to avoid a transfer of a “charitable
contribution.”56 The impact of this is that a trustee may use neither
federal bankruptcy law nor state fraudulent transfer law to avoid a
charitable contribution payment made by a debtor within the
applicable time frame.
Relevant to the scope of this comment is a significant item that
the drafters of the UVTA considered yet declined to include in the
2014 amendments.57 The drafters of the UVTA declined to
51
52
Id. at 573.
53
§ 544(b)(1).
54
See COLLIER, supra note 5, at ¶ 548.01.
55
Jay Auslander & Julie A. Goren, Avoidance and Recovery of Fraudulent
Transfers, 25 AM. JUR. PROOF OF FACTS 3d 591, § 5 (2019).
56
§ 544(b)(2).
57
This is highlighted insightfully by Kenneth Kettering, whose article has
been cited throughout to illustrate the development of the American law of
fraudulent transfers. Kettering served as the Reporter for the Drafting
include charitable contributions as an exemption to fraudulent

transfer law, choosing not to mirror the equivalent exemption in
Section 548 of the Bankruptcy Code.58 The exemption currently
contained in the Bankruptcy Code was enacted in a 1998
amendment, and provides that any charitable contribution that does
not exceed fifteen percent of the annual gross income of the debtor
for the year in which the contribution was made is exempt from
avoidance by a bankruptcy trustee as a fraudulent transfer.59
If it has not already become clear, the federal Bankruptcy
Code leaves much to state law; where a portion of the Bankruptcy
Code does not address an issue or where it specifically refers to
state law, the state’s substantive property, contract, or other
applicable law applies.60 Section 548 specifically contains a two-
year reach-back period in which a trustee may find a fraudulent
transfer.61 A bankruptcy trustee may be inclined to utilize a state
law avoidance action in lieu of a federal bankruptcy action if the
state’s relevant statute of limitation exceeds Section 548’s two-
year period.62 At this intersection of federal and state law is the
notion that the Bankruptcy Code immunities for charitable
contributions apply only if a debtor makes a charitable donation
and later succumbs to bankruptcy.63 A creditor may still bring an
avoidance action under the UVTA if a debtor does not go
bankrupt, and in that case the charitable contribution immunities
will not apply.64 This is particularly important for the purposes of
this comment, where the focus is largely on parents making tuition
payments and subsequently filing for bankruptcy.
Committee on Amendments to the UVTA, and was a driving force behind the
amendments themselves. See Kettering, supra note 6, at 777 **. As such, his
background and experience with the UVTA lent credibility to his analysis of the
non-inclusion of charitable contributions as an exemption from voidable
transaction law in the UVTA.
58
59
§ 548(a)(2)(A).
60
See, e.g., 15 J. Maxwell Tucker, Tex. Prac. § 15.01 (rev. ed. 2020).
61
62
Id.
63
Id.
64
Id.
Understanding that an avoidance action may be brought

outside of the bankruptcy context—and knowing that the drafters
of the UVTA declined the invitation to extend its protections as far
as Section 548 of the Bankruptcy Code with regards to charitable
contributions—allows the reader to understand that implications of
tuition payments that are allegedly constructively fraudulent
extend beyond the specific scenario of bankruptcy.
IV. TUITION PAYMENTS AS SPECIFIC FRAUDULENT TRANSFERS
A. Background of Reasonably Equivalent Value and

Fraudulent Transfers
The heart of this comment focuses on whether tuition
payments made by parents who subsequently file for bankruptcy
within the applicable reach-back periods are subject to avoidance
by a bankruptcy trustee. The case law on this topic is
unsurprisingly highly varied, with apparent and admittedly human-
nature focused policy implications injected into different courts’
analyses. Although two courts may use the same test under similar
facts, they may come out with two very different holdings. This
comment seeks to understand the analyses currently used by
different courts and to determine which, if any, analysis should be
the uniform analysis moving forward.
In determining whether a tuition payment made by a parent for
their child’s higher education is a fraudulent transfer, courts most
often are asked whether the parent received reasonably equivalent
value for the payment. Under both Section 548 of the Bankruptcy
Code and Sections 4, 5, and 8 of the final version of the UVTA, a
payment will not be subject to avoidance as a constructively
fraudulent transfer if the debtor received reasonably equivalent
value in exchange for the payment.65 Despite the term’s frequent
appearance, neither the UVTA nor the Bankruptcy Code
specifically define what is meant by the term reasonably equivalent
value.66 It is not surprising to find that because of the lack of
65
11 U.S.C. § 548; UNIF. VOIDABLE TRANSACTIONS ACT §§ 4, 5, 8 (UNIF.
L. COMM’N 2014).
66
See 11 U.S.C. § 101 for definitions.
clarity about the meaning of reasonably equivalent value, courts

reach different results in their analyses.
A useful starting point to understand reasonably equivalent
value is City of Milwaukee v. Gillespie.67 In Gillespie, the court
outlined different factors used by that specific federal jurisdiction,
the 7th Circuit, in determining whether a debtor received
reasonably equivalent value in exchange for a transfer made by
them.68 Gillespie took place in the context of Chapter 13
bankruptcy proceedings, when the trustee sought to avoid transfers
as constructively fraudulent after the debtors transferred property
to the city to satisfy unpaid real estate taxes.69 Although Gillespie
did not occur in the tuition payment context, the factors are useful
nonetheless.
First, courts look at whether the value of what was transferred
is equal to the value of what was received.70 Second, courts look
at the fair market value of what was transferred and received.71
Third, courts consider whether the transaction took place at arm’s
length.72 Lastly, the good faith of the transferee is a factor to be
weighed.73 The court also notes in Gillespie that for the fact-
finder, determining whether a debtor received reasonably
equivalent value “is not a fixed mathematical formula[,]” allowing
the reader to infer that the factors are simply items to be weighed
and considered using the fact-finder’s judgment.74
Although Gillespie takes place outside of the context of tuition
payments, it is useful because it illustrates that while courts have
tried to identify certain factors to determine whether reasonably
equivalent value has been received, this determination is still very
much a question left up to the judge’s own interpretation and moral
spin, as the following cases will illustrate.
67
City of Milwaukee v. Gillespie, 487 B.R. 916 (E.D. Wis. 2013).
68
Id. at 920.
69
Id. at 918.
70
Id. at 920.
71
Id.
72
Id.
73
Gillespie, 487 B.R. at 920.
74
See Id.
B. Tuition Payments and Reasonably Equivalent Value

The first illustrative case is Gold v. Marquette Univ., (In re
Leonard), which took place in Michigan in 2011 and relied on 6th
Circuit precedent.75 In Leonard, the debtor parents paid tuition for
their 18-year-old son after receiving a student loan check made out
to both the student son and the debtor father.76 The check was
deposited into the parents’ joint checking account.77 After the
parents filed for bankruptcy, the trustee sued for avoidance of the
payments as fraudulent transfers.78 The trustee argued that the
debtor parents received no reasonably equivalent value for the
tuition payments.79 Specifically, the trustee argued that any value
that was received was actually received by the student son and not
the debtor parents.80
In opposition, the university argued that the debtor parents
actually did receive reasonably equivalent value.81 It argued that
the parents received intangible benefits in the form of peace of
mind, because the parents knew that the son would be afforded
opportunities in life on the basis of the education they helped pay
for.82 In other words, although the son received the education, the
peace of mind that the parents received would not have occurred
but for the provision of that education.83 The university also
argued that the debtors received reasonably equivalent value in the
anticipation of no longer remaining financially responsible for their
son once he completed his education.84
The court ultimately held that the debtor parents did not
receive reasonably equivalent value in this case.85 The court
explained that reasonably equivalent value requires a concrete and
75
Gold v. Marquette Univ. (In re Leonard), 454 B.R. 444 (E.D. Mich.
2011).
76
Id. at 446-47.
77
Id. at 450.
78
Id. at 447.
79
Id. at 448.
80
Id. at 454.
81
In re Leonard, 454 B.R at 454-55.
82
Id.
83
Id. at 455.
84
Id.
85
Id. at 457.
quantifiable economic benefit.86 Here, they reasoned, the debtors

did not receive any economic benefit whatsoever and in fact had
no legal obligation to support their adult son.87 The court stated
that moral obligation, love, affection, and spiritual fulfillment are
not enough to constitute reasonably equivalent value.88
Importantly, the court noted that these intangible benefits, as
appreciated as they may be by the debtor parents, are of no use to
creditors.89 The court also noted that the fraudulent transfer
defendant has the burden of showing that the indirect benefit
received by the debtor is concrete and quantifiable.90
Contrast Leonard with DeGiacomo v. Sacred Heart Univ., Inc.
(In re Palladino), which took place only five years later in the state
of Massachusetts.91 In Palladino, the debtor parents paid for their
daughter’s college education, making over $60,000 in payments to
the college.92 The court noted that the daughter was 18 years old at
the time of the payments and therefore considered an adult;
however, the court points out that she was a dependent student for
financial aid purposes.93 After the debtor parents filed for
bankruptcy, the trustee sought to recover the payments as
constructively fraudulent under both the federal Bankruptcy Code
and the Massachusetts state fraudulent transfer laws.94 The court
concedes that “but for the question of value, the Palladinos’
payments would qualify as constructively fraudulent[,]” because
the Palladinos were insolvent when they made the payments and
the payments were made within the two-year Bankruptcy Code
reach-back period and the four-year state law reach-back period.95
In its analysis, the court recognizes that decisions by other
courts regarding tuition payments made in the bankruptcy context
86
Id.
87
In re Leonard, 454 B.R at 457.
88
Id.at 458.
89
Id.
90
Id. at 456-57.
91
DeGiacomo v. Sacred Heart Univ., Inc. (In re Palladino), 556 B.R. 10
(Bankr. E.D. Mass. 2016).
92
Id. at 12.
93
Id.
94
Id. at 13.
95
Id. at 15.
are conflicting.96 The court explains that trustees’ efforts to “claw

back tuition payments” have been seen by some courts as
interrupting the maintenance of the family unit and, therefore,
these payments should not be eligible for avoidance.97 The court
also notes that there is a “societal expectation that parents will
assist with such expense if they are able to do so.”98 On the other
hand, the court concedes that some courts, like the Leonard court,
have found tuition payments to be avoidable “because the benefits
parents received were not ‘concrete’ or ‘quantifiable.’ ”99 The
court, again like in Leonard, notes that parents are under no legal
obligation to pay for their child’s education.100 Lastly, the court
notes that “[e]thereal or emotional rewards, such as love and
affection, do not qualify as value for purposes of defeating a
constructive fraudulent conveyance claim.”101
Despite the competing precedents, the Palladino court
ultimately held that the debtor parents received reasonably
equivalent value and therefore the tuition payments were not
avoidable.102 The court stated that “[t]he emphasis should be on
‘reasonably’ ” in the determination of whether a debtor parent
received reasonably equivalent value in exchange for tuition
payments made for their children.103 The court leans heavily
towards parents’ subjective beliefs, stating that a parent will often
“not know at the time she pays a bill . . . if the medical procedure,
the music lesson, or the college fee will turn out to have been
‘worth it.’ ”104 Further, the court states, a mother or father “can
reasonably assume” that paying for their child’s undergraduate
education “will enhance the financial well-being of the child which
in turn will confer an economic benefit on the parent.”105 In the
Palladinos’ case, they truly believed that paying for their
96
Id.
97
In re Palladino, 556 B.R. at 15.
98
Id.
99
Id.
100
Id.
101
Id.
102
Id. at 16.
103
In re Palladino, 556 B.R. at 16.
104
Id.
105
Id.
daughter’s college degree would lead to financial self-sufficiency

and provide them an economic benefit.106 The court found that
benefit to be “concrete and quantifiable enough.”107
The variations outlined in Leonard and Palladino have not
been uncommon. Courts have repeatedly gone both ways when it
comes to determining whether a debtor parent has received
reasonably equivalent value.108 Two recent cases also show other
lenses courts are willing to view the facts through in order to
achieve desired outcomes.
C. Other Analyses of Tuition Payments as Fraudulent

Transfers
In the 2018 case of Geltzer v. Oberlin Coll. (In re Sterman),
the Bankruptcy Court for the Southern District of New York held
that tuition payments made by debtor parents in a Chapter 7 case
both were and were not subject to avoidance, depending on
whether the children had yet reached the age of majority.109 This
represents a different permutation of the traditional reasonably
equivalent value analysis noted above. The court stated that
payments made before the children reached the age of majority
were not constructively fraudulent and therefore were not subject
to avoidance.110 However, the court noted, payments made after
the children reached the age of majority were constructively
fraudulent and were subject to avoidance by the bankruptcy
trustee.111 In its analysis, the court again indicates that the
reasonably equivalent value determination is not mathematical, and
that “direct and indirect benefits flowing to the debtor may be
considered.”112 The court also concedes that “[w]hether insolvent
parents receive reasonably equivalent value for college tuition
106
Id.
107
Id.
108
For a comprehensive catalog of recent cases, see Huish, supra note 3, at
2182-86.
109
Geltzer v. Oberlin Coll. (In re Sterman), 594 B.R. 229, 239 (Bankr.
S.D.N.Y. 2018).
110
Id.
111
Id.
112
Id. at 234.
payments made for the benefit of their adult children is a culturally

and socially charged issue.”113
Although the court understood that the debtors’ tuition
payments were economically “prudent,” any benefit that the
parents may have received does not constitute “value” within the
meaning of the Bankruptcy Code or the applicable state law.114
The court reasoned that a debtor parent has no legal obligation to
pay for their child’s education.115 Furthermore, the court declined
to accept the debtors’ argument that they received “psychic” or
“intangible” benefits in the peace of mind of knowing their
children were housed, fed, and taken care of.116 These types of
benefits alone, according to the Sterman court, are not sufficient to
constitute reasonably equivalent value.117
Interestingly, however, the court took a different view when it
came to payments made while children are minors. In that
circumstance, the court recognized that while current case law has
no requirement that parents pay for a minor child’s college tuition,
the issue is only whether the parents receive reasonably equivalent
value when they do so.118 The court seems to take the tact that
providing education, no matter what level and what standard of
school—whether private or public—to a minor child is akin to a
legal requirement and, therefore, a debtor parent does receive
reasonably equivalent value in those situations.119 In other words,
only when a parent makes tuition payments on behalf of a minor
child does that parent qualify as having received reasonably
equivalent value.
Another interesting and recent case is Pergament v. Brooklyn
Law School. In Pergament, the court used a completely different
analysis than the reasonably equivalent test.120 Again taking place
113
Id. at 236.
114
Id.
115
In re Sterman, 594 B.R. at 237.
116
Id. at 237-38.
117
Id. at 238.
118
Id.
119
Id.
120
Pergament v. Brooklyn Law School, 595 B.R. 6 (Bankr. E.D.N.Y.
2019).
in New York, this case is the most recent—occurring in 2019.121

Rather than focusing on whether the debtor parent received
reasonably equivalent value, the court focused on whether the
educational institution was the initial or subsequent transferee of
the payment.122 The court stated that if the college was a
subsequent transferee that took in good faith from the initial
transferee (i.e., the child), the payment would be protected.123
However, if the college was the initial transferee, the payment
would be subject to avoidance.124
Rather than analyzing this case under Section 548 of the
Bankruptcy Code as most courts have done, this court looked at
Section 550.125 As noted earlier, this section of the Bankruptcy
Code provides that a trustee may not recover under Section 550 of
the Bankruptcy Code if the transferee “takes for value, including
satisfaction or securing of a present or antecedent debt, in good
faith, and without knowledge of the voidability of the transfer
avoided . . . .”126 Ultimately, the court remanded the case for
further fact-finding on whether the university was an initial or
subsequent transferee.127 The court stated after a lengthy analysis
that if any payments were made early enough that, had the children
withdrawn from school, the university would have been required to
refund the payments to the children, then the university would be a
subsequent transferee.128 On the other hand, if payments were
made at a time after which the university would have been
obligated to issue a refund had the students withdrawn, this would
render the university the initial transferee.129 In other words, as to
the former, the trustee could not recover the payments as
fraudulent transfers; as to the latter, the trustee would be successful
in an avoidance action. The analysis in Pergament boils down to
timing, with the initial versus subsequent transferee decision
121
Id.
122
Id. at 10.
123
Id.
124
Id.
125
Id.
126
11 U.S.C. § 550(b)(1).
127
Pergament, 595 B.R. at 19.
128
Id. at 18.
129
Id.
turning solely on whether or not the student was beyond the time
period in which they would be entitled to a refund if they withdrew
from the program.130 Although this case is highly fact-specific,
there is no reason why it would not be foreseeable that other
lawyers might begin to argue this same approach as a way to
preclude needing to examine whether a debtor parent received
reasonably equivalent value.
The varying outcomes in the few cases illustrated above are
the norm. The cases that have examined this issue show no
specific pattern or consensus between jurisdictions, with varying
results and judicial opinions that cannot hide their implicit value-
driven analyses. Again, it is quite clear that this is not the typical
debtor-creditor dispute. More parties and more interests are
competing in a realm of incredible importance to American
society. For that reason, it is important to consider the underlying
policy implications and determine how these implications can
direct the law towards uniformity.
V. POLICY CONSIDERATIONS
“Avoidance law is not only about creditors’ interests. It is

also about transferees’ interests.”131 In a situation where a debtor
parent has made a payment for their child’s education, there are
even more parties involved. In determining whether those
payments are subject to claw back by a bankruptcy trustee, courts
must be keenly aware of not only the creditors’ and transferees’
rights, but also the rights of the parents as debtors and the rights of
their children as students. As the leading treatise on bankruptcy
has noted, “[b]ankruptcy is a collective statutory remedy for
debtors and creditors alike.”132 However, unlike a “normal”
bankruptcy, in instances where tuition payments are involved, the
parties are greater and the rights more at odds with one another.
130
Id. at 17-18, 19 n.15 (noting that whether the tuition payments had
reached the point of being nonrefundable was a factual question not briefed or
decided on appeal).
131
132
COLLIER, supra note 40, at App. Pt. 44 Part 1, Ch. 2 ¶ 1.1.
Students’ rights are probably the most overlooked in tuition

payment analyses in the context of this comment. This is likely
not intentional; it just happens that their rights are not part of the
legal analysis or the reasonably equivalent value consideration.
The statutory language itself typically limits reasonably equivalent
value to that which was received by the debtor and the debtor
only.133 This may also be a reason why some courts have found
reasonably equivalent value and others have not—perhaps an
implicit recognition of the impact that their decision will have on
the students. A brief glimpse into student loan statistics shows
why a judge may be inclined not to avoid a transfer made by a
parent for their child’s education. In 2019, there were 45 million
borrowers with a combined more than 1.5 trillion dollars in student
loan debt.134 Student loan debt is the second highest consumer
debt category, coming in only behind mortgages.135 The average
debt of the class of 2017 is $28,650.136 Delinquency is prevalent,
too, with over 5 million borrowers in default and 11.4 percent of
borrowers at ninety or more days delinquent.137 The statistics are
staggering, and one must understand that when trustees are
successful in avoiding tuition payments, the college or university is
still going to want to recover that money from the students
themselves. Where a student has counted on their parents’
financial assistance, the unexpected incurrence of thousands of
dollars in student loan debt can be earth-shattering.
Not to be forgotten are the rights of impacted creditors. A
creditor is defined as “an entity that has a claim [(i.e., a right to
payment)] against the debtor that arose at the time of or before the
order for relief concerning the debtor.”138 In a bankruptcy case,
there are two goals: “resolving the competing claims of multiple
133
See 11 U.S.C. § 548(a)(1)(B); see also UNIF. VOIDABLE TRANSACTIONS
ACT (UNIF. L. COMM’N 2014).
134
Zack Friedman, Student Loan Debt Statistics in 2019: A $1.5 Trillion
Crisis, FORBES (Feb. 25, 2019, 8:32 AM), https://www.forbes.com/sites/zack
friedman/2019/02/25/student-loan-debt-statistics-2019/#9ace7c7133fb.
135
Id.
136
Id.
137
Id.
138
creditors, and freeing the debtor from its financial past.”139 The
term bankruptcy itself brings with it “both the notions of a remedy
for creditors and of debtor relief.”140 However, this was not
always the case. In fact, historically, bankruptcy law was
developed as a “collective creditors’ remedy,” designed to further
“the goals of efficiency and of distributive justice.”141 Even
limiting the analysis to creditors’ rights specifically, the “central
premise is that ‘first in time is first in right,’ ” which illustrates that
even creditors must compete among themselves in a bankruptcy
situation.142 More broadly, however, and mentioned previously, is
“the maxim that a man must be just before he is generous.”143
As they relate to fraudulent transfers, creditors’ rights are
extremely significant. First, whether a debtor received reasonably
equivalent value is often measured from the creditor’s perspective
and not the debtor’s.144 The policy behind this view is that
“constructive fraud seeks to redress a wrong against creditors,
namely the removal of leviable assets from the debtor’s estate.”145
The UFTA itself notes in an official Comment that value
determinations are to be made “in light of the purpose of the Act to
protect a debtor’s estate from being depleted to the prejudice of the
debtor’s unsecured creditors. Consideration having no utility from
a creditor’s viewpoint does not satisfy the statutory definition.”146
This also illustrates the idea that even if something may be
considered valid consideration from a contracting standpoint, the
same valid consideration may not be enough to represent
reasonably equivalent value in a constructive fraud case.147
Although creditor-focused, however, the determination of value is
still made objectively, and it is important to note that the definition
139
140
Id. at 3.
141
Id. at 4.
142
Id. at 4-5.
143
Walker v. Loring, 36 S.W. 246, 247 (Tex. 1896).
144
145
Id.
146
UNIF. FRAUDULENT TRANSFER ACT § 3 cmt. 2 (NAT’L CONF. OF
COMM’R ON UNIF. STATE L. 1918).
147
of value requires the debtor to either receive property or “satisfy or

secure a debt.”148
Debtor rights are equally as important in a bankruptcy case.
Designed to give debtors a fresh start, the hallmark discharge of
debts is said to allow “hopelessly insolvent individuals . . . get out
from under the weight of their debts and resume productive lives
as contributing members of society.”149 Even in “common
understanding,” the term bankruptcy signifies “financial ruin or
death.”150 In the context of the specific issue of tuition payments,
however, debtors’ rights are probably the least important. This is
because when a bankruptcy trustee seeks to avoid a payment made
by a parent, the entity answering for that payment is the college or
the university.151 Ultimately, the debtors are in the same position
whether the payment is avoided or not; it is the colleges, the
universities, and the students whose rights become most affected,
along with the rights of any affected creditors who may or may not
be able to reach the funds encumbered by these payments.
Yet in this scenario, the debtors are more than just debtors.
They are parents—parents who have saved and made the conscious
decision to contribute to their children’s educations. The
importance that parents place on contributing towards their
children’s education is highlighted in Fidelity Investments’
recently conducted “10th Annual College Savings Indicator
Study.”152 The study reports that 73 percent of parents are saving a
median amount of $300 per month for their children’s education.153
Sallie Mae reports that 79 percent of parents are willing to stretch
themselves financially to pay for their children’s education and
that 84 percent of families believe college will help their children
148
Id. at 589.
149
Id. at 4.
150
Id. at 2.
151
Brief for Am. Council on Educ. et al. as Amici Curiae Supporting
Appellees, DeGiacomo v. Sacred Heart Univ., Inc. (In re Palladino), 556 B.R.
10 (Bankr. E.D. Mass. 2016) (No. 17-1334).
152
Emmie Martin, Here’s How Much the Average American Family Has
Saved for College, CNBC (Jun. 16, 2017, 9:29 AM), https://www.cnbc.com/20
17/06/16/how-much-the-american-families-have-saved-for-college.html.
153
Id.
get higher paying jobs.154 USA Today reports that a recent survey
shows that 44 percent of parents feel guilty that they have not
saved more towards their children’s education.155
These statistics indicate the significant role that saving for a
child’s education plays in parents’ lives. Not only do they show
that most parents at least think about saving and are making a good
faith effort to do so, they illustrate the duty that parents feel
towards contributing to their children’s education.
Again specific to the context of this comment is yet another
very important party’s rights to be considered: the educational
institution’s. In a powerful Amicus Brief to In re Palladino, the
American Council on Education (“the Council”) explained the
significant effect that avoidance of tuition payments has on
colleges and universities.156 Representing all higher education
sectors and comprised of 1700 members, the Council explains its
belief that parents absolutely receive reasonably equivalent value
from tuition payments made for their children.157 Furthermore, the
Council highlights that bankruptcy trustees are seeking to recover
the payments from the colleges and the universities, not directly
from the student on whose behalf the payments were made.158
As the Council notes, colleges and universities “are not in a
position to anticipate and budget for the unpredictable claw back of
payments for education they have already provided.”159 Their only
options are to “saddl[e] affected students with more (and likely
uncollectable) debt” or to increase costs amongst the rest of the
154
How America Pays for College 2019, SALLIE MAE,
https://www.salliemae.com/about/leading-research/how-america-pays-for-
college/.
155
David Carrig, Majority of Parents Saving for Kid’s College Have
Socked Away Less Than $10,000, USA TODAY (Feb. 28, 2018, 11:48 AM),
https://www.usatoday.com/story/money/personalfinance/budget-and-
spending/2018/02/28/paying-college-parents-saving-529-student-
loans/378209002/.
156
Appellees, DeGiacomo v. Sacred Heart Univ., Inc. (In re Palladino), 556 B.R.
10 (Bankr. E.D. Mass. 2016) (No. 17-1334).
157
Id. at 4.
158
Id. at 2.
159
Id. at 14.
student body to offset these claw backs.160 As federal and state

cuts continue to occur with more and more frequency, colleges and
universities are relying more than ever on tuition.161 The Council
also points to falling endowments and falling enrollment
nationwide to explain the heavy reliance that higher education
institutions place on tuition.162 Practically speaking, universities
and colleges are unable to plan for unpredictable claw backs of
tuition payments.163 Furthermore, they have few options to
recover from the students themselves if their parents’ payments are
avoided as constructively fraudulent.164
As important as the above competing policy considerations
and the rights of each party are, there is another right that cannot
be forgotten: the right to an education. Education is so highly
treasured in American society that children are given the right to a
free public education, regardless of their income or background.165
Education is the cornerstone upon which democracy is built. A
society cannot function unless its children are educated, in varying
forms and covering varying topics. The great lengths both students
and parents alike are willing to go to by putting themselves in
severe debt just to obtain an education is a prime example of the
importance that society places on education.
160
Id. at 14-15.
161
Id. at 15 (noting that although tuition used to account for only a quarter
of public higher education revenues twenty-five years ago, tuition now
comprises more than half of universities’ and colleges’ revenue. Furthermore,
federal and state level assistance to higher education has decreased anywhere
from six to sixty-five percent since 2008.).
162
Appellees at 15-19, In re Palladino, 556 B.R. 10 (No. 17-1334).
163
Id. at 19.
164
Id. at 20-21 (explaining that options range from treating a student’s
account as delinquent to pressuring students to take out additional loans.
Treating a student’s account as delinquent is not palatable because it could
prevent students from “registering for classes, participating in campus activities,
eating at the dining hall, living in university housing, and graduating.” Forcing
an affected student to take out additional loans is not practical, either, because of
the likely risk of being unable to secure approval for anything other than an
expensive private loan.).
165
Your Right to Equality in Education, ACLU DEPARTMENT OF PUBLIC
EDUCATION, https://www.aclu.org/other/your-right-equality-education.
As mentioned above, charitable contributions are exempt from

the reach of a bankruptcy trustee if specific criteria are met.
Despite the Bankruptcy Code’s exemption, however, the drafters
of the UVTA declined to adopt such an exemption, citing
creditors’ rights and hasty, careless amendments to the Bankruptcy
Code that provide more ambiguity than clarity with regards to
charitable contributions.166 Notwithstanding these problems, there
is promise in creating a well-crafted exemption for tuition
payments in both the Bankruptcy Code and the UVTA that mimics
the charitable contribution exemption but eliminates the alleged
ambiguities.
One state, Connecticut, has already gone so far as to amend
their version of the UVTA to specifically exempt from the reach of
a bankruptcy trustee a payment made by a parent on behalf of their
child’s undergraduate education.167 Connecticut’s statute
specifically states that a transfer is not voidable if it “was
made . . . by a parent or guardian on behalf of a minor or adult
child in furtherance of the child’s undergraduate education.”168 As
the Amicus Brief to In re Palladino notes, the passing of the law
was necessary to “protect children from adverse effects of their
parents subsequently defaulting on obligations after they have
made tuition payments to colleges and universities.”169 It goes
further, though, because it is even more necessary to protect the
fundamental role that an education plays in society.
VI. WAY AHEAD
When a parent pays for their child’s education, they are

usually doing so for something more than themselves. Society
expects parents to support their children, and to do whatever they
can to give their children a better life than they themselves had.
Not only does society expect this, but it is truly at the heart of what
166
167
CONN. GEN. STAT. § 52-552i(f) (2017); see also Brief for Am. Council
on Educ. et al. as Amici Curiae Supporting Appellees at 9, In re Palladino, 556
B.R. 10 (No. 17-1334).
168
§ 52-552i(f).
169
Appellees, In re Palladino, 556 B.R. at 23 (No. 17-1334).
it means to be a parent. Furthermore, from a societal perspective,

there is nothing worth more value than an education, for it is by
learning about the past that society is able to improve its future. It
is by learning about concepts and applications that one did not
even know existed that one is able to create and innovate things
that no one ever thought would exist.
In a bankruptcy situation, there are no winners. Whether it is
the debtor that loses, the creditor that loses, or a third party that
loses, there are frequently never enough assets to satisfy the
debtor’s current liabilities; hence, the debtor ends up in
bankruptcy. The question to be asked and answered is who can
better bear the brunt of this loss? In the scenario presented by this
comment, there are three options: the university, the student, or the
creditor. Again, the question arises: to whom is justice owed when
a debtor is required to be just before they are generous?
Ultimately, the weight of the value of an education to the
student, to the debtor-parent, and to society as a whole outweighs
the value to a creditor of a debt owed to them by one debtor.
Education is the only means by which society may flourish. While
a creditor may need to absorb the loss by passing it on to other
customers, this impact pales in comparison to the impact of
impeding an education to a student who may already have beaten
the odds by even attending college.
For this reason, the UVTA and the Bankruptcy Code should
both be amended to exempt tuition payments made by parents on
behalf of their children. Parents receive reasonably equivalent
value for these payments, going far beyond mere ethereal or
emotional rewards. Parents are receiving the value of economic
peace of mind, knowing that their current investment will pay off
in dividends in the future when their children are able to be more
financially self-sufficient. Although the value may not be
quantifiable at the moment the payments are made, it is reasonable
to find that a parent is receiving a return in providing for their
children’s education. Again, the test is not absolute value, but
rather reasonably equivalent value.
To assist courts with their differing views, both the UVTA and
the Bankruptcy Code should explicitly enumerate tuition payments
as a statutory exception to fraudulent transfer laws, similar to the
current Connecticut UVTA and the charitable contribution
exemptions contained in the Bankruptcy Code. However, certain

clarifications must be made within both statutes to prevent the
ambiguities that are rife in the charitable contribution exemptions.
Amending the Bankruptcy Code will serve to protect tuition
payments made when a parent files for bankruptcy, but it is also
important to amend the UVTA and push states to adopt the new
version so that even if a parent does not reach the level of
bankruptcy, tuition payments are still not subject to avoidance
actions by creditors.
First, there should be no maximum percentage of income that
cuts off what value of tuition payments are exempted. This will
alleviate any similar concerns to those that the UVTA drafters had
about the ambiguities present in the charitable contribution
exemptions with regards to whether the cap applies on a per-
contribution basis. Second, to lessen concerns about debtor-
parents not receiving reasonably equivalent value, only those
payments to accredited universities or colleges should be
exempted. This will ensure that parents are not paying for
education at a less-than qualified institution that will provide no
real financial security or benefit to the student or the parents.
Furthermore, the UVTA and the Bankruptcy Code should
follow the lead of the Connecticut UVTA, but in a more expanded
sense. The Connecticut UVTA exempts tuition payments to
undergraduate institutions. While it is sensible only to include
undergraduate education, the statutes must be qualified to include
trade schools and vocational schools, ensuring that the
understanding of the importance and value of all types of education
is implicit in the statutes. Society prospers by the provision of
education, but not only by traditional undergraduate education.
Trades like electrical, plumbing, mechanical, and the myriad of
other blue-collar vocations are equally as important to a successful
society as traditional college. What should not be exempted from
the trustee’s reach is tuition payments for graduate or professional
programs. While all education is valuable, again we are faced with
competing rights where an insolvent debtor is involved. Creditors
should not be penalized for additional education beyond what
society sees as necessary.
The UVTA and Bankruptcy Code must also explicitly exempt
the payments regardless of whether the student is a minor or an
adult, subject to an age cap. The parents’ reasonably equivalent

value is no less when the student is nineteen years old than it is
when the student is seventeen years old. As previously mentioned,
society already views students as dependents for financial aid
purposes. This even holds true in the health insurance context,
where children may remain on their parents’ plans until age 26.
Society understands that children require some level of support
past the age of majority—the Affordable Care Act provision
allowing children to remain on their parents’ health insurance was
one of the earliest and most popular provisions.170 As the
legislature has already evidenced their view that children are still
dependent on their parents to some extent—at least for health
care—until age 26, the UVTA and Bankruptcy Code should follow
suit and cut off tuition payment exemptions when the student
reaches age 27. Again, this would ensure that creditors are not
completely disregarded in the proposed statutory exemptions.
While amending the UVTA and Bankruptcy Code to exempt
tuition payments may lead some commentators to reiterate their
valid and absolutely warranted concerns with the Bankruptcy
Code’s charitable contribution exemptions, and lead to some
concern with tuition payment exemptions following the same path,
these concerns can be mitigated if the above suggested criteria are
implemented. Moreover, it is imperative to understand the
difference between education and charitable contributions. When
a debtor donates to charity, they are doing so as a personal choice,
to a charity of their choice, and if one is optimistic—for the reason
of bettering a purpose they believe in. Realists understand that
charitable contributions are often made for the tax benefits they
provide. Education is fundamentally different. A parent
contributing to their child’s education is not simply to better a
purpose they believe in. Rather, it is to provide financial self-
sufficiency to their child, to ensure that the child is not
economically dependent on their parents in perpetuity, and to
provide what society so conspicuously views as a parent’s
obligation, at least to some extent.
170
Weiwei Chen, Young Adults’ Selection and Use of Dependent Coverage
under the Affordable Care Act, 6 FRONTIERS IN PUB. HEALTH 1, 1 (2018).
Exempting tuition payments from bankruptcy estate reach is

not only right on a fundamental level, but it is also in the best
interest of society. Understandably, not everyone will be satisfied
with this outcome, but this is true no matter how a statute is
amended. By amending the UVTA and the Bankruptcy Code, the
drafters of uniform laws and our legislature can show to students
how valuable an education truly is.
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COLLEGE TUITION PAYMENTS AS FRAUDULENT

TRANSFERS, AND THE PRICE EDUCATION HAS TO PAY

Be just before you are generous.1 That is the seminal maxim

sections of the Bankruptcy Code to apply—relative to the

proposed that the Bankruptcy Code be amended to exclude tuition

II. HISTORY OF FRAUDULENT TRANSFERS

The goal of this analysis is to understand the implications that

collect payment.4 Generally, this area of the law aims to “protect

“intent to hinder, delay, or defraud” a creditor is voidable.11 This

avoidance claim.20 The “primordial rule” which prescribes

insolvent on the date of the transfer or becoming insolvent as a

good faith, and without knowledge of the voidability of the

III. HISTORY OF RELEVANT BANKRUPTCY LAW

In order to understand the importance of the issue at hand, a

requires the trustee, through its fiduciary obligations, to conserve

of money that it could prove were actually or constructively

reasonably equivalent value in exchange for a transfer made is “[a]

A. The Charitable Contribution Exception

include charitable contributions as an exemption to fraudulent

Understanding that an avoidance action may be brought

IV. TUITION PAYMENTS AS SPECIFIC FRAUDULENT TRANSFERS

A. Background of Reasonably Equivalent Value and

clarity about the meaning of reasonably equivalent value, courts

B. Tuition Payments and Reasonably Equivalent Value

quantifiable economic benefit.86 Here, they reasoned, the debtors

are conflicting.96 The court explains that trustees’ efforts to “claw

daughter’s college degree would lead to financial self-sufficiency

C. Other Analyses of Tuition Payments as Fraudulent

payments made for the benefit of their adult children is a culturally

in New York, this case is the most recent—occurring in 2019.121

“Avoidance law is not only about creditors’ interests. It is

Students’ rights are probably the most overlooked in tuition

of value requires the debtor to either receive property or “satisfy or

student body to offset these claw backs.160 As federal and state

As mentioned above, charitable contributions are exempt from

VI. WAY AHEAD

When a parent pays for their child’s education, they are

it means to be a parent. Furthermore, from a societal perspective,

exemptions contained in the Bankruptcy Code. However, certain

adult, subject to an age cap. The parents’ reasonably equivalent

Exempting tuition payments from bankruptcy estate reach is

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