San Jose Bankruptcy Attorney comments on private student loan lender forgiving debt of students at flight school that filed for bankruptcy protection
San Jose Bankruptcy Attorney comments on private student loan lender forgiving debt of students at flight school that filed for bankruptcy protection.
When Silver State Helicopters abruptly filed for Chapter 7 bankruptcy protection, it left hundreds of students holding student loans for an education they would not receive. A federal judge in Florida recently approved the settlement of a class-action suit on behalf of more than 2,700 students enrolled in the bankrupt flight school. The $112.7 million settlement with Student Loan Xpress forgives approximately 75 percent of the debt that the students took on for flight training they did not receive. The amount of individual debt forgiveness varies depending on the number of hours of training that the students had received.
Silver State’s owner, Jerry Airola, has been sued by the bankruptcy trustee over a $10 million payment to himself as part of a recapitalization process that the bankruptcy trustee alleges left the school vulnerable to bankruptcy by stripping it of its assets. The trustee has characterized the payout as a fraudulent transfer. Airola denies the allegation and blames the school’s bankruptcy on the collapse of the lending industry and the school’s inability to generate sufficient cash flow.
Bankruptcy trustees have the legal recourse to recover funds they believe were fraudulently transferred. Examples of fraudulent transfers include transferring assets to hide ownership from creditors and the bankruptcy court, and asset transfers made immediately before a
bankruptcy filing.
Ex-sheriff candidate accused of fraud tied to bankruptcy, Las Vegas Sun, October 8, 2009
Lender Agrees to Forgive Flight Students’ Debt, Wall Street Journal, October 28, 2009
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