Alexandria, Va.— The latest American Bankruptcy Institute (ABI) podcast features former ABI Resident Scholar Prof. Melissa Jacoby talking with Scott F. Gautier of Robins Kaplan LLP (Los Angeles) and Christopher A. Ward of Polsinelli in Wilmington, Del., who were the primary attorneys representing a committee of former students of Corinthian Colleges, which filed for chapter 11 on May 4, 2015, amid allegations of having deceived students regarding its schools’ graduation and job-placement rates. Corinthian had also been ordered to pay more than $530 million to the Consumer Financial Protection Bureau in restitution to borrowers for allegedly trapping many students into private “Genesis loans,” which had interest rates as high as 15 percent.
Once one of the largest for-profit post-secondary education companies in the U.S. and Canada, Corinthian ran more than 120 colleges at its peak, but it has since been forced to sell or close most of its campuses by the U.S. Department of Education. In an unusual move, the student committee was approved by the U.S. Trustee in the case to represent the interests of up to 500,000 former students seeking to have the outstanding balances on their student loans forgiven due to findings of fraud on the part of Corinthian.
“We were asked specifically, prior to Corinthian’s bankruptcy, whether we could help students utilize chapter 11 on an involuntary basis against Corinthian to avoid the anti-class agreements and the binding arbitration provisions that are contained in their enrollment agreements,” said Gautier. “Chapter 11 does not really offer a way to avoid binding arbitration or class waivers. However, what we noted to the students was that if … Corinthian [was in] bankruptcy … it would offer the opportunity for collective proceedings even aside from a class action through a class of creditors that could participate in the case.”
“What’s very interesting about the Corinthian situation is that [while] most of the protections in the Bankruptcy Code are set up to assist students with the discharge of student debt … this was not the situation that we were faced with,” said Ward. “In Corinthian, these students, who incurred an enormous amount of student debt, were faced with the situation where the college itself filed for bankruptcy. They were left with having to pay these student loans … for a college that no longer existed, was sold to another college, and that in turn diminished the value of their degree and the education they received…. For purposes of the Bankruptcy Code, these students were now unfortunately no different than any other creditor of the bankruptcy estate…. That is why the student committee was so important, because these students needed a voice in the case.”
Click here to listen to the podcast.
ABI’s podcast series features interviews with important figures or experts discussing timely bankruptcy topics or issues. ABI podcasts are freely available to members, the public and the press, and can be accessed on ABI’s Newsroom website.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/calendar-of-events.
