In our education fraud practice, we have been dismayed many times over how even defrauded students of for-profit colleges cannot discharge their student loan debt, yet the for-profit institutions can avail themselves of the bankruptcy code’s protections if things go wrong for them.
If you are currently struggling to repay your private student loan debt, take a look at the CFPB’s help page.
On September 30, 2014, the First District Appellate Court of Illinois affirmed the trial court’s dismissal of the class action lawsuit filed against Stratford Career Institute which alleged the school violated the Illinois Consumer Fraud Act and committed other wrongs against a class of plaintiffs by selling high school diploma courses that were not recognized by colleges.
The sole reason for affirming the dismissal was due to the plaintiffs’ filing bankruptcy prior to the class action lawsuit against Stratford Career Institute being filed. This was so, the appellate court found, even for the case of the second plaintiff who did not recognize she had a claim against the school until well after her bankruptcy case was closed. This is because the claim automatically became property of the bankruptcy estate, whether or not she was aware of the claim against the school.
The appellate court further stated that even for the first plaintiff, who discovered her claim against the school just prior to filing for bankruptcy, that the right “still belongs to the [bankruptcy] trustee.”
The opinion, Deweese, et al v. Stratford Career Institute, is appellate case number 14-cv-0074.