LOS ANGELES--(BUSINESS WIRE)--A committee representing the interests of former students of Corinthian Colleges, Inc., one of the nation’s largest for-profit college systems before its recent closure, has requested that the court handling Corinthian’s Chapter 11 bankruptcy place a hold on all efforts to collect on obligations that are currently considered “student loan” debt.
Hundreds of thousands of former students may be adversely affected by the collapse of Corinthian, which once operated 107 campuses before shutting its doors in April. The student committee seeks the imposition of a court-ordered freeze on efforts by any party to collect on obligations related to federal and private funding of Corinthian—funds that would have been advanced for tuition, fees, and other school-related expenses—while the responsibility for the repayment of those funds is determined in Corinthian’s bankruptcy.
“Corinthian and its affiliates received billions of dollars from government and private student loan programs, while it significantly misrepresented the value of its educational programs to students, the government, and accreditation agencies,” said Mark Rosenbaum, Director of Public Counsel Opportunity Under Law.
In May, the U.S. Trustee’s Office granted the request of an ad-hoc group to recognize a special committee representing the interests of students in the proceedings, the first known instance of a student group being given a seat at the table in the bankruptcy of an educational institution.
“Until the full extent of Corinthian’s misconduct is known, and until the court decides who holds responsibility for repaying billions of dollars of advances that were funded on Corinthian’s misrepresentations, all collection efforts should be put on hold,” said Scott Gautier of Robins Kaplan LLP. “This motion represents an effort to maintain the integrity of the Chapter 11 process by preserving the status quo between Corinthian, the government, student victims, and other creditors while they work together to resolve what might be a multi-billion dollar disaster.”
Public Counsel and Robins Kaplan LLP represent the student committee in the Delaware bankruptcy proceedings, with the assistance of Polsinelli LLP as local Delaware counsel. The students’ legal team argues that without the hold on student debt collection, an estimated tens of thousands of students, currently subject to harsh collection proceedings, would need to engage Corinthian in individual proceedings to establish Corinthian’s wrongdoing. Efforts to negotiate a consensual Chapter 11 plan for Corinthian, they say, would be hindered if not rendered impossible by the overwhelming litigation demands and with the rights of creditors in constant flux.
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