Bankruptcy Lawyer Bryan W. Stone answers the question: “Can I get rid of student loans by declaring bankruptcy?”
In one of the more ironic bankruptcy stories of the year, the filing by the parent company for ITT Technical Institutes has devolved into one of the most paper-heavy affairs imaginable.
Although some may think that out of any company having to file for bankruptcy, a tech institute’s filing would be relatively digitized and organized, think again. ITT Educational Services, which owned and operated more than 130 ITT Technical Institutes campuses throughout the nation, is now grappling with how to handle its 40,000 formerly current students and the related fallout since its bankruptcy filling in September.
With that many students, not to mention alumni dating back to 1946, comes paperwork. A lot of paperwork. The document management company retained to handle the bulk of locating and organizing the materials just had to purchase a fifth electric pallet jack to tackle the more than 40,000 boxes of student and alumni records ITT left behind.
The bankruptcy trustee assigned to the case has been spearheading the daunting task of cataloguing, and determining the ultimate fate of, these files, which contain Social Security numbers, loan information, transcripts and other personal data that will likely need to be accessed long after the bankruptcy concludes.
In a process that under more ordinary circumstances would have taken between six (6) months to a year to complete, the trustee has had mere weeks to track down and secure the 137 facilities ITT owned and leased across 38 states so the documents were not cleaned out by the building owners.
Even though ITT began digitizing its new student files beginning in 2001, there have been problems with students discovering wrong graduation dates and missing classes. Adding to the patchwork of physical and digital files are the masses of employee records, 401(k) retirement funds, and pension benefits files, not to mention the numerous lawsuits previously filed against ITT by federal agency and some state attorneys general.
The bankruptcy filing did not come as a shock to many after the U.S. Department of Education clamped down on the institution’s federal funding earlier this year after finding that it was not in compliance with its accreditation. The move prohibited ITT from enrolling new students with federal loans and slowed down the pace at which ITT received student financial aid to ensure funds were being properly handled.
The expense of moving, warehousing, and retaining the vast amounts of records involved drained ITT’s accounts. In its September 2016 bankruptcy filing the company estimated its assets and liabilities both between $100 million and $500 million.
As of the end of November, the bankruptcy case’s beleaguered trustee still had not even been able to locate and catalogue the entirety of ITT’s records. This led the bankruptcy court to issue an order on Nov. 8 enjoining, or temporarily halting, the plethora of lawsuits pending against the institution until at least Dec. 21.
The parties suing ITT, including the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the attorneys general of Massachusetts and New Mexico, have been clamoring for access to the company’s records, but if their litigation had immediately moved forward to the discovery stage the trustee’s work would become even more difficult, if not impossible.
Although there is no model for a for-profit college filing a Chapter 7 bankruptcy, the trustee has said that the process is working, although she expects the bankruptcy case alone to continue for another three (3) years.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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