Bankruptcy Lawyer Bryan W. Stone answers the question: “What are North Carolina’s exemptions?”
We’ve previously discussed the difficult road that individuals have when trying to escape crushing student loan debt. Frustratingly, bankruptcy laws have been written to make it nearly impossible to get out from under educational debt. Despite the difficulty, many creative bankruptcy attorneys are exploring loopholes and other untested strategies, some of which have met with success.
In yet another attempt to help debtors escape educational loans, a group of former students of ITT Educational Services have filed a claim with a bankruptcy court in Indiana asking that they be treated as creditors to the company. The novel approach is an attempt to force the courts and the company to give former students a seat at the table, fighting for money alongside bankers and other creditors.
The issue with ITT goes back several years, with federal and state regulators long suspicious of their practices. There had been numerous claims that ITT had purposely mislead students about the value of their education and the job prospects of graduates. This misinformation then caused thousands of people to pay ITT billions of dollars to take courses that ended up doing little if anything to help create stable careers. In fact, most students left school with crushing mountains of debt and little prospect of finding paying work in their chosen fields.
In the 10 years prior to ITT filing for bankruptcy (something that only happened after the federal government pulled the plug on access to federal student aid), ITT students had taken out more than $7 billion in debt, roughly $1 billion of which were high interest private loans. Despite the reprehensible behavior by ITT, students have continued to have a difficult if not impossible time getting out from under the debt. Attempts to bankrupt the educational loans have been unsuccessful, which led a group of Harvard lawyers working at the school’s Project on Predatory Student Lending to try a new approach.
The group at Harvard found five former ITT students and filed suit on their behalf, seeking to intervene in ITT’s bankruptcy case currently being handled by a judge in southern Indiana. The five former students have sued and are asking to be treated as creditors in the company’s bankruptcy. By doing this, they hope to put themselves on a level playing field with other creditors, like banks, when it comes time to divide up the company’s assets. The goal is to secure a portion of the company’s assets to use as debt forgiveness for former students.
According to court records ITT has reported assets of around $389 million and liabilities of $1.1 billion. That means even if the students are successful at getting added as creditors, the trustee will need to engage in a delicate balancing act. Though the students certainly appear deserving, other creditors are owed money too and it will be the trustee’s job to ensure that everyone gets a fair share and that the former students don’t end up crowding out other lenders. If the approach succeeds, expect it to be used by other students in the future.
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.
See Our Related Video from our YouTube channel:
See Our Related Blog Posts: