If you remember, the ITT Technical Institute was a for-profit technical college that declared bankruptcy in 2016, closing campuses in Texas and across the rest of the country. Recently, nearly 750,000 students who took out student loans to attend ITT Technical Institute, received an early Christmas present in the last week of November 2018. After two years of bankruptcy proceedings, these students will finally receive the loan forgiveness that they fought so hard to obtain, from a school they said, wasn’t completely upfront about the education they would receive.
Student Debt Loan Forgiveness
When the dust settled from ITT declaring bankruptcy, almost a million students across the US were left not only with an incomplete degree, but also the student loan debt from attending classes at the now-defunct college. Shortly after, thousands of those students began applying for a borrower defense to repayment with US Department of Education. Under US Department of Education rules, borrowers can seek this form of student loan debt forgiveness if their situation meets certain criteria.
Students seeking debt relief were dealt a second blow in 2018 when the US Department of Education began stalling these loan forgiveness proceedings, claiming they were working to repeal and replace the rules with stricter policies. This move left many individuals in student loan limbo. Without the support of the US Department of Education, students joined a $1.5 billion lawsuit against ITT, claiming consumer-protection violations and breach of contract for students who attended the school between 2006 and 2016.
New ITT Student Debt Settlement
Wednesday’s announcement comes as a win for students who claim that ITT acted in a predatory manner, with a Judge earmarking almost $600 million to be paid back to students out of any money left over after the company pays back secured lenders. While a small victory, there are still some previous students repaying federal student loans and efforts will continue to have the remaining debt forgiven by the US Government.
Paying Unsecured Claims in Bankruptcy
When a person or organization files bankruptcy in Texas or any other state, the bankruptcy courts work with the debtor to organize and payback as much debt as the debtor can afford. Outstanding debts are separated into priority, secured, and unsecured debt to be paid back in that order. Unfortunately for creditors who have won a judgment, unsecured debt is the last to be paid back and only if there is any leftover money in the bankruptcy coffers. Because this repayment is split between all creditors, they sometimes only see a fraction of what they are owed.
Bankruptcy, however, is intended to be a safety net for citizens who are experiencing a diminished standard of living due to debts they can’t pay back and can be an extremely effective debt relief tool. Contact a Dallas bankruptcy attorney to find out if you can eliminate or decrease your debt by utilizing the US Bankruptcy Code.