Bankruptcy Article #18

Watson v. Boyajian, First Circuit Court of Appeals Decision dated March 25, 2005

The Watsons had minor children who attended a parochial school. The Watsons filed a Chapter 13 case and proposed to continue paying for parochial school for their children while also proposing a Chapter 13 payment plan for their creditors. The Chapter 13 Trustee objected to the Watsons’ Chapter 13 plan on the grounds that not all of the Watsons’ disposable income was to be paid into the payment plan.

The First Circuit Court of Appeals held that the Watsons’ payments for parochial school were not reasonably necessary for their budget and that they should contribute those funds into their payment plan for the benefit of creditors. The result of this decision is that parents filing bankruptcy will no longer be able to pay for their children to attend parochial school, an expense previously considered reasonable by many courts provided that the expense was not excessively large on a monthly basis. This decision demonstrates the necessity of careful preparation of a budget when parents file bankruptcy.