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Colleges can be forced to return tuition payments made for students whose parents can’t cover their own debts, according to a federal appeals court ruling that opens up higher education institutions to more litigation in bankruptcy courts, WSJ Pro Bankruptcy reported. An appeals court in Boston said on Tuesday that tuition payments can be recovered when a student’s parents later declare bankruptcy, the first appellate decision to address squarely whether such expenses can be taken back and redistributed. Lawsuits targeting tuition payments have become popular among bankruptcy trustees tasked with digging up funds after parents file for bankruptcy. The results have been mixed in the nation’s bankruptcy courts, with some judges shielding colleges and sometimes the students themselves from having to return tuition money. Many schools have opted to settle with trustees rather than test the controversial lawsuits in the courts. Tuesday’s ruling sided with a bankruptcy trustee who sued Sacred Heart University of Fairfield, Conn., to claw back tuition paid on behalf of a student whose parents were involved in a multimillion-dollar fraud that sent her father to prison. The decision said that because parents don’t benefit economically for sending adult children to college, the tuition they paid can be unwound. The tuition payments “furnished nothing of direct value” to creditors of the parents, said the U.S. Court of Appeals for the First Circuit.

A judge yesterday sent Washington County, Pa., business owner George Retos Jr. to federal prison for a year and a day for conspiracy to defraud the IRS and filing a false bankruptcy declaration in connection with his companies, the Pittsburgh Post-Gazette reported. U.S. District Judge Arthur Schwab also gave Retos a two-year probationary term when he gets out. Retos, owner of Prime Plastics and Plastic Power in Washington, Pa., had pleaded guilty last year. In addition to the IRS and bankruptcy frauds, he had accepted responsibility for a wire fraud charge in another scheme to fleece Pennsylvania's unemployment compensation system. He did not plead to that charge, but in federal court defendants acknowledge the conduct described in additional counts even if they don't plead, which can then be used at sentencing. Retos and a person identified in court records only as N.R., the nominal president of Plastic Power acting solely at Retos' direction, failed to pay the IRS payroll and employer taxes for the two plastics companies.