Geltzer Sues Catholic Schools In Bankruptcy Court

Hands in Prayer with CrucifixA bankruptcy trustee in Brooklyn is telling the U.S. Bankruptcy Court that there’s no value in going to Catholic school.

Robert L. Geltzer, a Chapter 7 bankruptcy trustee, filed suit against a local Catholic seeking a combined total of about $21,000 for what he seems to think as a valueless education.

His position calls into question the value of a Catholic school education as well as the right of a parent to decide what’s best for their children.

We’ve been watching the Brooklyn bankruptcy case of Geltzer v. Xaverian High School (Adversary Proceeding No. 1-13-01105-cec) for some time.  Now the New York Post has reported on the matter in a piece titled, Bankruptcy trustee targets Catholic schools.

What, I wonder, is Geltzer getting at? And more to the point, what is he saying about the place of a bankruptcy court to decide value of a private school education?

The Nature Of The Lawsuit

The people who had filed for bankruptcy were sending their son to Catholic school rather than opting for the free New York City Public School system.

The lawyer for Xaverian, in court papers filed seeking a dismissal of the lawsuit, indicates that the parents “sought out grants from Xaverian equaling nearly half of the tuition due, with the other half paid by the Debtors in monthly installments during the annual billing cycles.”

Under the U.S. Bankruptcy Code, the trustee can avoid (in other words, undo) any transfer of property (including money) that was made in the run-up to the bankruptcy filing under certain circumstances.

For the purposes of these lawsuits, Geltzer is able to avoid the payments made to the Catholic schools on the basis that they didn’t receive reasonably equivalent value for their money.

Interestingly enough, the only other time such a lawsuit has been filed was in the case of Geltzer v. St. Frances de Chantel School (In re Fitzpatrick), Adv. Pro. No. 11-2918 (Bankr. S.D.N.Y. Nov. 28, 2011) – which Geltzer later dismissed.

See also:

Schools On The Defense

As you can imagine, this is an issue being watched closely by not only parents but also by private schools of all stripes.

If Judge Craig comes down on the side of the Chapter 7 trustee, schools could be forced to cough up large chunks of money for tuition paid up to 6 years ago. Even the most well-heeled institutions could find themselves in tight financial situations overnight.

More important, however, is the long-term effects of such a decision. If Geltzer wins the day, private schools of all stripes will need to begin running credit reports on parents to ensure that they aren’t at risk for filing for bankruptcy.

They’ll no longer worry solely about whether the tuition bill gets paid, but about the overall financial health of their students’ parents. Credit scores will factor into the decision of whether to admit a particular student.

Many of my own clients through the years have sent their children to Catholic schools to avoid exposing them to underperforming schools in their own neighborhoods.

In the event of a Geltzer win, those parents could be forced to sacrifice their childrens’ educational future in order to protect themselves from their creditors through bankruptcy.

Putting Faith In Parents

It’s important to note that it was the choice of the parents to put their son into Catholic school. They looked at their faith, the relative abilities of various schools to educate and care for their son, and acted accordingly.

I don’t see the bankruptcy court overturning that judgment, regardless of the parents’ financial problems. To do so would undoubtedly cast a shadow over the right of a parent to act in the best interests of a child.

The matter is under consideration by Judge Carla E. Craig, and I’ll report back once a decision is issued.

Click here for a copy of the Complaint filed against Xaverian.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.