These students were defrauded by ITT, and are suing to be creditors in its bankruptcy case, thus giving them a voice in the bankruptcy proceeding. This also entitles them to the company’s assets.
Queens, NY (PRWEB) February 01, 2017
When looking at student loans and bankruptcy, it is often the student who is filing for bankruptcy protection. But in the Case of ITT Education Services, it was the for-profit school filing for bankruptcy, and a large group of students who were left to deal with the consequences. The story of ITT and its former students brings up several key issues concerning bankruptcy, including dealing with student loans, determining the creditors in a bankruptcy case, and establishing assets. A January 3, 2017 article by The Washington Post detailed the students’ fight to become creditors in the company’s bankruptcy. Mr. Feinstein, Esq., an experienced bankruptcy attorney in New York, spoke about the various important bankruptcy topics surrounding this story.
ITT filed for Chapter 7 bankruptcy in September 2016. A business Chapter 7 bankruptcy is intended to liquidate a company's assets and pay its debt obligations. Exemptions are not available in a business bankruptcy, so all assets of the corporation are sold and the proceeds are distributed among its creditors. In the case of ITT, various creditors, former employees, and federal regulators are fighting for these assets. However, angry former students are now entering the fray. “These students were defrauded by ITT, and are suing to be creditors in its bankruptcy case, thus giving them a voice in the bankruptcy proceeding. This also entitles them to the company’s assets,” says Mr. Feinstein.
They have also petitioned the Court to consider loan forgiveness as part of ITT’s liquidation. Student loan debt is notoriously hard for people to discharge in their personal bankruptcy cases, and is a point of much contention among Americans. According to the Wall Street Journal article, “the group is asserting claims against the company of consumer protection violations and breach of contract, and asks for class-wide status to cover anyone who attended ITT Tech in the past 10 years. The group is also seeking an injunction to stop the collection of private loans administered by ITT, which ran an in-house lending program that is at the center of two federal lawsuits.”
This also brings up the issue of determining assets in a bankruptcy case. In Chapter 7 bankruptcy, a trustee is assigned to liquidate the debtor's nonexempt assets in a way that most benefits the return to the debtor's unsecured creditors. “In the case of ITT, testimonials from former students and employees claims that the company pushed high-interest private loans that the students couldn’t repay,” says Mr. Feinstein. “So the Court must now decide whether the money collected by ITT and its uncollected loan debt can be considered legitimate assets.”
The Law Offices of Bruce Feinstein has nearly two decades of experience in bankruptcy law, helping clients and families resolve their issues and move forward with their lives. Visit bfeinsteinesq.com for more information or call (718) 514-9770 to reach the New York office.