Brown Schools Inc., a for-profit company that runs therapeutic education programs for teenagers who have emotional or behavioral problems, abruptly filed for Chapter 7 liquidation in U.S. Bankruptcy Court in Wilmington, Del., late last month.
The move caused the Austin, Texas-based company’s 11 boarding schools and other educational facilities in California, Florida, Idaho, Texas, and Vermont to close their doors immediately.
Brown Schools listed in a bankruptcy petition estimated debts of up to $50 million, and assets of up to $10 million.
“It is desirable and in the best interest” of the privately-held company, its stockholders, and its creditors that Brown Schools file for Chapter 7 liquidation, according to a statement by the company’s board of directors.
Company officials were unavailable for comment last week.
The filing also contains a list of 40 creditors with the largest unsecured claims. They include a $1.5 million arbitration settlement to Aramark Management Services and $1.5 million in legal fees and legal settlements to law firms and individuals in five states.
Brown Schools Inc. and its affiliates have been the subject of lawsuits claiming students were abused or neglected at its facilities.
Texas regulators had also accused a Brown wilderness camp near Austin of physical abuse and neglect in the death of a 17-year-old student in 2002. But a Mason County grand jury later stated that evidence in the case would not support criminal charges against anyone.
The bankruptcy filing took many people by surprise.
One parent, George Gowen III, was attending a parent-staff conference when the announcement was made. His 15-year-old son attended Brown Schools’ Boulder Creek Academy in Sandpoint, Idaho.
“It was as if a bomb had gone off,” Mr. Gowen said of staff and parents’ responses. “The effect was more like that of a sudden death … rather than the end of a business.”