After language school abruptly closes, can parents get a refund?

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Parents said they recently received letters just days after an I-Team investigation into the closure of the language school. (WLS)

An ABC7 I-Team Investigation
The I-Team is uncovering new information about a language school which abruptly closed. Parents of students at "Language Stars" said it all happened with little explanation after they paid thousands of dollars upfront for classes.

Parents said they recently received letters just days after an I-Team investigation into the closure of the language school. They appear to be claim forms - a chance to recover money - so we asked an attorney what it all means.

READ: Language Stars Affidavit of Claim

"Everything was shut down," said Geraldine Tillman, who contacted the I-Team.

She and her daughter Molly were scrambling for answers when Language Stars abruptly shut down last month before the term ended.

"We are out probably around $600-700," Tillman said.

Now, several parents told the I-Team that they received a letter which includes an "affidavit of claim" and are wondering if it's a chance to recoup their losses.

One Chicago bankruptcy attorney said they may not want to get their hopes up. That's because the letter says: Language Stars' assets total $43,000, but their liabilities are more than $4.6 million - not including nearly $2.5 million in lease commitments.

An attorney tells the I-Team this form falls under state law and is a less expensive option to federal bankruptcy, which Language Stars has not done. Because there is virtually no money left, the attorney we spoke to said the letter may discourage creditors from bothering to file claims.

Last week, the I-Team reported that Language Stars posted this to their website: "Unfortunately, we cannot service our debts as they come due and have exhausted all sources of funding."

The I-Team tried to contact the owner and the CEO of the company, but neither would talk.

The company, headquartered in Chicago, had 17 locations most in the Chicagoland area, plus dozens of partnerships with schools. Language Stars says it taught about 10,000 students.

That form parents received also includes this message: "The company experienced significant cash flow issues resulting from a decline in student enrollment combined with a career-based model with significant long term lease obligations." Therefore, they say, "their board of directors... created a trust agreement and assignment for the benefit of creditors," which includes parents.

"The responsible thing to do would be at least refund people who had committed through the year," Tillman said.

A Better Business Bureau complaint claimed tuition was collected just one day before the school closed.

If an unpaid creditor sues, a court could hold the owners and even shareholders, personally liable for their company's debts. This action happens only in certain circumstances such as the court finding those individuals committed fraud or the creditors suffered an unfair cost.

The Illinois Attorney General told the I-Team they have opened up an investigation. The AG's office and the Better Business Bureau have also received complaints. Creditors can file for an involuntary bankruptcy petition. If successful, the court could appoint a trustee, who might scrutinize language stars' finances more than their own appointed trustee.

The I-Team reached out to Language Stars' trustee. He has not returned our calls or emails.

Click here to see Language Stars' closure statement and contact information.
Click here to file a complaint with the Illinois Attorney General.
Click here for more information about filing a claim in Pro Se Small Claims Court.
Related Topics:
educationI-Teamconsumerschool closings
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