Fulltext Search

On April 12, the Consumer Financial Protection Bureau (CFPB) released a blog post titled “Busting myths about bankruptcy and private student loans.” In the blog post, the CFPB argues that certain private education loans can be discharged in bankruptcy. Specifically, the CFPB argues that the following private student loans can be discharged without a showing of undue hardship and an adversary proceeding:

A bankruptcy court’s recent decision in Bailey Tool & Mfg. Co., et al. v. Republic Bus. Credit (In re Bailey Tool & Mfg. Co.), Adv. No. 16-03025-SGJ (Bankr. N.D. Tex. Dec. 23, 2021) serves as a reminder for lenders that they should avoid certain actions when dealing with distressed borrowers. Specifically, in Bailey, a bankruptcy judge found a lender squarely at fault for its borrower’s bankruptcy and subsequent liquidation, and held the lender liable to the borrower’s bankruptcy estate for various breach of contract, tort, and bankruptcy claims.

Within the past 18 months, two bankruptcy courts have used the same factors, but reached opposite conclusions, about the characterization of two merchant cash advance funding transactions as either a “true sale” or not a “true sale” – and instead, a disguised financing. In doing so, the courts’ decisions confirm the importance of appropriate structuring to achieve true sale treatment.

The Second Circuit Court of Appeals recently issued an opinion that potentially broadens the proximate cause element of claims brought under the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO’s proximate cause element requires a plaintiff to allege facts plausibly establishing that there is a “direct relationship” between the claimed injury and the defendant’s conduct in violation of RICO.

In an underreported amendment to the Bankruptcy Code, the Small Business Reorganization Act amended §547(b) of the Code to add an explicit requirement for the bankruptcy trustee or debtor in possession to conduct “reasonable due diligence” before filing a preference action. The apparent goal of this amendment to the Bankruptcy Code is to reduce the number of frivolous preference lawsuits pursued by trustees.

The year is 2012, and the biotech you founded has just received FDA approval for a wildly promising product with significant differentiation from other products in its class. You only have 35 employees, but begin to build a lean, incentive-based salesforce to launch your novel commercialization strategy built on a specialty distribution model, high-touch reimbursement support, aggressive marketing tactics, and premium pricing. Hiring a compliance officer is not a priority at this time.

On August 16, 2021, the US Court of Appeals for the Fifth Circuit held that an individual guarantor remained liable for more than $58 million in commercial debt, despite the individual’s claims that the lenders induced him to provide the guaranty under duress. See Lockwood International, Inc. v. Wells Fargo, NA, et al., Case No. 20-40324 (5th Cir. Aug. 16, 2021).

In In re KarcreditLLC [1], the U.S. Bankruptcy Court for the Western District of Louisiana was faced with two lenders with claims to one original stock certificate as collateral.

On July 15, the U.S. Court of Appeals for the Second Circuit ruled that private student loans are not explicitly exempt from a debtor’s Chapter 7 bankruptcy discharge.