Much to the shock of students and employees, ITT Educational Service Inc., one of the country’s largest for profit schools with locations across the nation, including Illinois, shut down and filed for Chapter 7 bankruptcy earlier this month. A glimpse into the proceedings, as reported by the Wall Street Journal, provides insight into the bankruptcy process with regard to the role of the trustee.
In the 12 days since the trustee was appointed to the Chapter 7 bankruptcy:
- She has already assigned a liquidator to sell the furniture, computers and other assets from locations across the country.
- To keep students and employees appraised of the bankruptcy case, the trustee has quickly set up a website and a hotline for ease of communication. Some students were dropped after paying tuition, so they may be entitled to a refund and it is anticipated that some of the employees will sue because they did not receive the notice of termination required by federal law.
- The trustee has also arranged to lock down personal data stored in more than 100 servers across the country, and she has hired a company to get 15 years of student transcripts for review in light of the fact some students are believed to be indebted to the company and may have to pay delinquent balances.
- As for the land and buildings owned by the company, the trustee has hired a realty company to put them on the market in order to turn the assets into cash payable to creditors.
- In order to pay for all the activity required to fulfill her role, the trustee has secured a lender who will be paid out of the liquidation proceeds.
And how does the trustee get paid for all this work and more to come? As a starting point, each Chapter 7 trustee receives an administrative fee of roughly $60 to oversee a bankruptcy case, which comes out of fees paid to the court when filing, unless waived. If there is any non exempt property that can be administered in a bankruptcy such as art, property, jewelry or cash, he or she will eventually receive a commission based on the amount disbursed to interested parties such as creditors.
Generally, because of the amount of work involved, trustees will often receive maximum commissions based on a sliding scale:
25% of the first $5,000 distributed
10% of any amount between $5,001 and $50,000
5% of any amount between $50,001 and $1,000,000, and
3% of all amounts in excess of $1,000,000
If you are considering Chapter 7, 13 or business bankruptcy protection and want more information about how you can protect your property, contact the Law Offices of Charles E. Covey for help today.
Sources: Wall Street Journal, “ITT Educational Debuts in Bankruptcy Court”, by Peg Brickly, September 28, 2016.; Nolo, “How Does the Bankruptcy Trustee Get Paid?” accessed September 29, 2016.