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Defunct Kentucky law school files bankruptcy papers
September 26, 2008
A defunct Kentucky law school has run into legal troubles — again.
The American Justice School of Law in Paducah, Ky., on Sept. 23 filed bankruptcy papers, listing the entity’s assets at $1.6 million and its debts at $5.2 million. Attorney Alan Stout, who filed the petition in the U.S. Bankruptcy Court for the Western District of Kentucky for the law school, said he expects the amount of debt to increase to about $6 million.
The American Justice School of Law, formed in 2004, is no longer a functioning law school, and it is unclear what impact the bankruptcy filing will have on the Barkley School of Law. That school was formed this summer after the American Justice School of Law was effectively dissolved as an educational institution.
The closure of the American Justice School of Law, which was not accredited by the American Bar Association, was the result of a lawsuit filed in November 2007 by students against the administrators of the for-profit school. The suit alleged a number of misdeeds, including that administrators delayed disbursing student loans for living expenses.
New investors and new administrators were brought in this summer as a result of the settlement, and the Barkley School of Law was formed. Barkley has taken on the students from the defunct American Justice School of Law, though Dean Larry Putt said the school currently has only 10 full- and part-time students.
Putt said that the bankruptcy filing puts a dark cloud over the Barkley School of Law, but that it will not have a direct impact on the new school, since it is a separate entity.
“Even as I speak, we are building the school up and moving forward,” Putt said.
Barkley could potentially face problems with its facilities and buildings, which are still owned by the American Justice School of Law and could be sold off to pay creditors.
Putt said Barkley has plans in place to purchase the land and facilities from the American Justice School of Law.
“Barkley may very well be able to hang on to the property if they can put together an offer that is acceptable to the bankruptcy trustee,” Stout said.
Included in the American Justice School of Law’s debt is $818,391 owed to LexisNexis, a division of Reed Elsevier Inc., and $241,000 to Westlaw, a product of Thomson Reuters/West.
The first bankruptcy hearing is scheduled for Nov. 6.
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