The Bankruptcy Law Firm, Prof. Corp.
ABI Analysis: The $1.7 Billion Student Loan Deal that Was Too Good to Be True
ABI Analysis: The $1.7 Billion Student Loan Deal that Was Too Good to Be True, because hundreds of thousands of borrowers still have to pay back the predatory, high interest rate, educational loans: Even though prosecutors said Navient had made predatory loans to hundreds of thousands of borrowers it knew couldn’t afford them, the $1.7 billion settlement the lender made last month with 39 states covered only about 66,000 who were in default. Those who managed to make the payments on their deceptive, high-interest debt — mostly to attend for-profit schools that left them with worthless degrees — would just…
In re Royal Street Bistro, LLC, ___ F. 4th ___., 2022 WL 499938 (5th Cir.Court of Appeals 2/16/22)
In a published order denying a petition for writ of mandamus to compel a district court to grant a stay pending appeal of a bankruptcy sale order, the Fifth Circuit Court of Appeals ruled that a chapter 11 trustee could sell real property free and clear of leasehold interests which were junior to the rights of a mortgagee which could have foreclosed out those interests in a state court proceeding, but for the bankruptcy. In doing so, the Court rejected alternative arguments relied upon by the bankruptcy court and the district court. Debtor Royal Street Bistro filed a Chapter 11…
California Adopts New Debt Collection Regulations (as reported in 2/11/22 Credit & Collection E-Newsletter)
New regulations from the California Department of Financial Protection and Innovation (Department) affecting licensure of debt collectors became effective as of January 1, 2022. The regulations provide the process and requirements to apply for a license as a debt collector, including application through the NMLS, and specify the acts that constitute grounds for license denial. The California Debt Collection Licensing Act (the Act) prohibits any person from engaging in the business of consumer debt collection without a license from the Department and authorizes the Department to adopt rules to administer the Act. Among other provisions, the recently effective rules require…
Article reports Landlords finding ways to evict tenants, after the landlord receives government rental aid
A day before she was due to be evicted in November 2021 from her Atlanta home, Shanelle King heard that she had been awarded about $15,000 in rental assistance. She could breathe again. But then the 43-year-old hairdresser got a letter last month from her landlord saying the company was canceling her lease in March —- seven months early — without any explanation. “I’m really pissed about it. I thought I would be comfortable again back in my home,” said King, whose work dried up during the pandemic and who now worries about finding another apartment she can afford. “Here…
Provisions in the CARES Act
On March 28, 2022, certain provisions in the CARES Act expire. Importantly for insolvency practitioners, the amount of eligible debt permissible for a debtor to file under Subchapter V of Chapter 11-the simpler, faster, less expensive, better for debtors kind of chapter 11 bankruptcy case–decreases from $7,500,000, back to the original amount of $2,725,625. It is uncertain whether Congress will extend this provision before it expires. If Congress does not pass legislation extending the $7,500,000 amount, or President Biden does not sign such legislation passed by Congress into law, before March 28, 2022, then the maximum allowable debt amount, for…
Senate Judiciary Subcommittee Hearing, held in February 2022, Takes Aim at “Texas Two-Step” Strategy to Shift Liabilities in Bankruptcy
American Bankruptcy Institute Reports that US Senate Judiciary Subcommittee Hearing, held in February 2022, Takes Aim at “Texas Two-Step” Strategy to Shift Liabilities in Bankruptcy: The Senate Judiciary Subcommittee on Federal Courts, Oversight, Agency Action and Federal Rights held a hearing last week titled, “Abusing Chapter 11: Corporate Efforts to Side-Step Accountability Through Bankruptcy.” The “abuse” being discussed in corporations, setting up a new corporation, putting product liability claims into the new corporation, and then having the new corporation file bankruptcy, to try to use bankruptcy to stay product liability litigation (like the J& J talc cancer litigation) and to…
Patterson v. Mahwah Bergen Retail Group Inc.
Patterson v. Mahwah Bergen Retail Group Inc.,___BR___, (E.D. Va. Jan. 13, 2022; appeal from bankruptcy court to district court number 21-167): It is becoming more common for confirmation of Chapter 11 plans, which grant non-debtors releases, are reversed on appeal. In Patterson, a District Judge, Virginia, on appeal from bankruptcy court to district court, emphatically rejects confirmation of a chapter 11 Plan which grants broad releases to non-debtor Third Parties. In a scorching opinion, US District Judge David Novak of Richmond, Va., set aside confirmation of a chapter 11 plan that contained “extremely broad third-party (non-debtor) releases” and said that…
California’s Debt Collection Licensing Act Creates Uncertainty
California’s new Debt Collection Licensing Act, Cal. Fin. Code § 100000 et seq., took effect on January 1, 2022. However, the legislature’s inartful and inconsistent draftsmanship has resulted in a great deal of uncertainty over who exactly must be licensed. Section 100001(a) provides that “no person shall engage in the business of debt collection in this state without first obtaining a license . . .”. Section 100005 authorizes the Commissioner of Financial Protection & Innovation to take specified enforcement actions if in her opinion ” a person who is required to be licensed under this division is engaged in business…
Fraudulent Transfer and Turnover Claims
In Pereira v. Urthbox, Inc., et al. (In re Try the World, Inc.), ___BR___, 2021 WL 3502607 (Bankr. S.D.N.Y. 8/9/21), the U.S. Bankruptcy Court for the Southern District of New York held that fraudulent transfer and turnover claims are “core” non-arbitrable claims and denied a motion to compel arbitration as to those claims.
In re Purdue Pharma
In In re Purdue Pharma, ___ F.Supp.4th___ (US District Court, Southern District of New York 12/16/21 decision, in appeal LC 21-07532 from Bankruptcy court to District Court, the US District Court Judge overturned the Order confirming debtor Purdue Pharma’s Chapter 11 Plan, because of the releases plan gave nondebtors (Sackler family). the US District Court ruled that the Bankruptcy court had no statutory power to impose non-consensual releases–by creditors which had NOT voted to accept the plan– of creditors’ direct claims against non-debtors for opioid damages. Sacklers paying 4.35 billion dollars into plan did NOT fix that fatal problem. Moral…