Daily Progress, Jacksonville, TX

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December 14, 2012

Lon Morris College: Liquidation plan could include suing former students for monies owed

'A student accounts receivable balance in excess of $1 million was generated, much of which is expected to become bad debt.'

JACKSONVILLE —

Lon Morris College estate officials are considering suing former LMC students to recover unpaid back tuition that might help defray bankruptcy costs.

This isn't intended as a first resort and certainly isn't the most popular option on the table. But the strategy is apparently used by several colleges around the country — although it was unclear Friday if any of those are actual bankruptcy cases.

Penn State, for instance, is suing dozens of former students to recover anywhere from $13,200 to $26,800 in tuition and loans. Yale University and Temple University go as far as to share the same debt collections attorney.

According to LMC Chief Restructuring Officer Dawn Ragan's account in the college's proposed liquidation plan, as much as $1 million might be collected from the sum total of students who still owe tuition.

"The charitable nature of the school would generally not support suing former students for tuition," the plan states. "Nevertheless, the plan reserves all the debtor's right to comment collection suits for unpaid tuition — including selling the claims and placing those rights with collection companies."

This possibility is mentioned in the same section of the proposed liquidation plan that stipulates LMC bankruptcy officials reserve the right to sue all LMC officers, directors, or trustees who were at the college at any point before the bankruptcy.

In other states, academic institutions have had success suing students. According to a report cited in the Daily Pennsylvanian, Penn State representatives are emphatic about recovering lost tuition.

“If students graduate or leave the University with an outstanding balance, their debt will be transferred to the University’s Collections Office,” Marlene Bruno, spokesperson for Penn's Student Registration and Financial Services, told the Daily Pennsylvanian.

According to the proposed Lon Morris liquidation plan, LMC originally offered significant scholarships to students in an effort to increase enrollment.

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