When Rising Tuition Costs Threaten Financial Stability: How Brooklyn’s Orthodox Jewish Families Are Finding Relief Through Chapter 13 Bankruptcy

The financial pressures facing Orthodox Jewish families in Brooklyn have reached unprecedented levels in 2024, with tuition for a girls elementary school in Lakewood recently increasing from $7,500 to $11,000 – a 46% increase that mirrors similar challenges across Brooklyn’s religious school system. As families struggle with private school tuition, kosher food, living in neighborhoods with Jewish communities, and larger families with three, four or more children, many are discovering that Chapter 13 bankruptcy offers a viable path to managing overwhelming debt while preserving their commitment to religious education.

The Growing Financial Crisis in Orthodox Communities

The financial burden on Orthodox families extends far beyond typical household expenses. Day school tuition is often cited as the single biggest strain on Orthodox family budgets, with about half, if not more, yeshiva parents unable to pay full tuition for their children, especially since most families are paying multiple tuitions for years with no respite. This crisis has intensified as Jewish life is so expensive that both parents can be making six figures and still struggle – even without excessive consumerism.

The situation has become so severe that by 2030, 30 percent of Brooklyn schoolchildren will be ultra-Orthodox, nearly all of whom study in yeshivas or related religious schools. With schools facing their own financial pressures, families are increasingly caught between their religious obligations and financial reality.

Understanding Chapter 13 Bankruptcy for Tuition Debt

Chapter 13 bankruptcy, often called the “wage earner’s plan,” provides a structured approach for families with steady income to reorganize their debts. Chapter 13 bankruptcy is designed for individuals with a steady income who wish to reorganize their debts into a manageable repayment plan over three to five years, and can be especially helpful for those looking to protect their home from foreclosure.

For families struggling with tuition debt, Chapter 13 offers several key advantages. Unlike other forms of debt, whether you can discharge tuition, room, and board owed to a college or other school depends on whether the debt is an educational loan. If you didn’t sign a promissory note or take out a loan from the school to cover these payments, you might be able to discharge the debt in bankruptcy.

Private School Tuition in Bankruptcy: What’s Allowed

One critical consideration for Orthodox families is whether they can continue paying private school tuition while in Chapter 13. The bankruptcy trustee may allow for private school tuition as part of a bankruptcy debtor’s expenses if the private school is a necessity, such as if you have a special needs child who must be trained at a private school to get their needs met.

Importantly, it’s possible (but not guaranteed) that a bankruptcy trustee might consider private tuition as legitimate if it is for a parochial school and is 15% or less of your income, though this varies by jurisdiction and requires discussion with your bankruptcy attorney.

New Benefits for Student Loan Borrowers in Chapter 13

Recent regulatory changes have made Chapter 13 more attractive for families dealing with education-related debt. Effective July 1, 2024, a new Department of Education regulation gives the debtor a month of credit toward loan forgiveness for each month the debtor makes a required plan payment under a confirmed chapter 13 plan.

This means that starting July 1, 2024, you’ll earn credit towards loan forgiveness programs for each month you make Chapter 13 plan payments, even without direct loan payments. This development provides additional incentive for families to consider Chapter 13 as a debt management strategy.

How Chapter 13 Protects Orthodox Families

Chapter 13 provides immediate relief through the automatic stay, which can stop your student loan company from harassing you during your bankruptcy for up to five years, as the automatic stay prohibits almost all creditors from collecting their debts. This breathing room allows families to focus on their financial recovery without constant creditor pressure.

Additionally, student loans are treated as nonpriority unsecured debts like credit cards and medical bills, and you are not required to pay them off in full through your Chapter 13 repayment plan. This can significantly reduce monthly payment obligations during the plan period.

Working with Experienced Legal Counsel

Given the complexity of bankruptcy law and the unique financial pressures facing Orthodox families, working with experienced legal counsel is essential. Families seeking relief from overwhelming tuition and education-related debt should consult with a knowledgeable bankruptcy attorney in Brooklyn NY who understands both the legal intricacies of Chapter 13 and the specific challenges facing religious communities.

The Law Offices of Ronald D. Weiss, PC, located at their Brooklyn office at 300 Cadman Plaza West, has been providing bankruptcy and debt relief services since 1993. With over 25 legal professionals and five convenient locations throughout Long Island and New York City, they offer free initial consultations and understand the unique financial pressures facing Orthodox families in Brooklyn.

Looking Forward: A Path to Financial Stability

While the financial challenges facing Brooklyn’s Orthodox Jewish community are significant, Chapter 13 bankruptcy offers a structured path forward. By allowing families to reorganize their debts while potentially maintaining their commitment to religious education, Chapter 13 can provide the breathing room needed to regain financial stability.

The key is acting before the situation becomes unmanageable. With proper legal guidance and a well-structured Chapter 13 plan, families can work toward eliminating overwhelming debt while preserving their values and educational priorities. As the Orthodox community continues to grow and face increasing financial pressures, understanding these legal options becomes crucial for maintaining both financial and spiritual well-being.

For families considering their options, the first step is a consultation with experienced bankruptcy counsel who can evaluate their specific situation and determine whether Chapter 13 bankruptcy is the right solution for managing tuition debt and achieving long-term financial stability.