ITT Educational Services Files Chapter 7 Bankruptcy after Government’s Crackdown on Student Aid

by San Antonio Attorney

ITT Educational Services, a for-profit educational company in the United States, sought for Chapter 7 bankruptcy protection on Sept.  16 after the federal government’s decision to stop financial assistance to new students.

The company plans to liquidate its business after closing about 130 campuses across the United States.  This action will affect an estimated 8,000 employees and 35,000 students.

The school has been barred by the Department of Education from accepting new students who were awarded federal assistance, which is a significant source of income for ITT.

The Indiana-based company has dealt with more critical observation by the Education Department starting in 2014.  ITT has been charged by state and federal regulators of misrepresenting the quality of its programs to the students and their students’ potential when they graduate.  A lawsuit has been filed by the Consumer Financial Protection Bureau against the company a couple of years ago, charging ITT of rapacious lending to students.

The legal action against ITT takes place as the government makes efforts to impose stricter rules on the for-profit education sector.

In 2015, Corinthian Colleges sought for bankruptcy protection and immediately shutting down 28 campuses.  It left about 16,000 students in limbo as the company dealt with state and federal investigations.

Based on ITT’s bankruptcy petition, the company declared assets between $100 million and $500 million, and the same amounts of debts.

In a Chapter 7 bankruptcy case, almost all of the debts are wiped out.  However, the bankruptcy trustee may sell some of the debtor’s possessions in order to repay creditors.  A San Antonio Chapter 7 Attorney can advise a consumer on they are eligible to file for a Chapter 7, or the best time to file for Chapter 7 bankruptcy.

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