Proposed payouts from the McNally Smith College of Music bankruptcy include nothing for students.
Trustee Patti Sullivan last month gave the court a list of people, companies and governmental agencies who will share the $904,933 that remains after liquidating assets from the former St. Paul music school, which abruptly closed in December 2017.
Sullivan and various consultants and law firms involved in administering the bankruptcy case would get $199,744.
The IRS would get $209,089 and the Minnesota Department of Revenue $44,074.
A long list of former college faculty and staff who went weeks without being paid would get the remaining $452,026, in payouts ranging from $165 to $12,762 per person — far less than they requested, in many cases.
Under federal bankruptcy law, wages take priority over prepayments for services. So, none of the roughly $564,000 in tuition paid in advance for the spring 2018 semester — disclosed in school co-founder Jack McNally’s personal bankruptcy filing — will be returned to students or their parents.
However, students who took out federal loans were eligible for forgiveness as long as they did not transfer their credits to another school.
And 10 former students did receive undisclosed payouts from McNally’s Smith insurance company to resolve claims separate from the bankruptcy case. The students claimed the college lied to them about its weak accreditation.
Besides students, those set to receive nothing from the liquidation include school co-founder Doug Smith and his wife, who loaned the school over $683,000 combined in an effort to keep it in business.
Altogether, the proposed bankruptcy distribution lists $7.55 million in allowable claims, 88 percent of which is set to go unpaid in the final distribution.
Objections to the distribution plan are due Monday.