As Corinthian Claim Deadline Approaches, Few Students Expected to Fi...

Only a fraction of former students are likely to file a claim in Corinthian Colleges Inc.’s bankruptcy case, according to a law firm representing them, as students armed with little information face numerous administrative tasks to recoup losses.

“If the process goes as it is, maybe 6% of students will file the appropriate papers,” said Mark Rosenbaum of Public Counsel, which is one of the law firms representing students in Corinthian’s bankruptcy case.

Any of the 81,000 former Corinthian students who believe they were defrauded by the schools, which include Everest, Heald and WyoTech campuses, are eligible to submit claims to the bankruptcy court. The form, known as a proof of claim, would make students eligible to participate in any recovery lawyers obtain on behalf of students if verified by the bankruptcy court.

Students have until July 20 to complete the forms, or they could forfeit their right to any recovery in Corinthian’s bankruptcy case.

In an effort to help students file claims—as most don’t have access to professional bankruptcy lawyers—Public Counsel has published two step-by-step videos to guide them through the process.

The situation is unusual in a bankruptcy case. Trade creditors are usually at least somewhat familiar with the bankruptcy process, and the bankruptcy code has creditor notification requirements that inform them of the case and next steps.

Public Counsel said Corinthian hasn’t acknowledged that all students are potential creditors and thus hasn’t notified all former students of the case. So even with the information ready for online consumption, many students are still fully unaware of the approaching deadline—or of the pendency of the case at all, Mr. Rosenbaum said. A lawyer for Corinthian didn’t respond to request for comment.

All of this highlights just how large a task those students are facing in obtaining any form of relief despite some breakthroughs that have come for Corinthian students—for example, the U.S. Department of Education has acknowledged widespread misrepresentation at Heald schools, and a student committee was formed in the bankruptcy case.

Getting up to speed on and filing forms in Corinthian’s bankruptcy case comes in addition to requirements for seeking loan forgiveness from the Education Department and in addition to any requirements to apply for any available relief from individual states. The territory is so uncharted that procedures for relief for some students are still being developed with the Education Department, although it has said it will “create a streamlined process that is fair to students who may have been victims of fraud and that holds colleges accountable to taxpayers.”

The Education Department has also said that where possible in considering loan forgiveness, it will “rely on evidence established by appropriate authorities in considering whether whole groups of students (for example, an entire academic program at a specific campus during a certain time frame) are eligible for borrower defense relief,” in order to simplify the process.

Mr. Rosenbaum said the Public Counsel plans to file a motion urging the bankruptcy court to likewise acknowledge that all students have a claim against Corinthian, eliminating the need for individual proofs of claim. However, it’s far from a guarantee—and even then the bankruptcy process and the governmental applications could remain separate.

“It makes no sense to us to have such a burdensome individualized process,” Mr. Rosenbaum said.

In the meantime, the July 20 deadline is rapidly approaching.

Write to Stephanie Gleason at [email protected]. Follow her on Twitter at @stephgleason