Bankruptcy

Nonprofit Develops Free App for Low-income Bankruptcy Filings

The nonprofit organization Upsolve is using technology and pro bono attorneys to develop an app to assist low-income Americans with Chapter 7 bankruptcy filings, according to an article from OZY. The app prompts users to upload relevant documents, like pay stubs and tax forms, and the data from them are used to auto-fill chapter 7 bankruptcy petitions, schedules, and statements of financial affairs. Additional information is auto-filled based upon the results of a credit check. The nonprofit is funded by philanthropists, Google, Harvard and the U.S. government.

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Boy Scouts of America Considers Chapter 11 Filing

The Boy Scouts of America (BSA) is struggling financially as costs mount for defending against allegations of  sexual abuse of boys, NBC News reports. The nonprofit organization is exploring all options to continue its programming without interruption, including filing for Chapter 11 protection. Following some controversial policy changes — including the removal of a ban on openly gay members, accepting openly gay adult scout leaders, accepting girls into the program and changing the program name to a gender-neutral alternative — the Mormon Church decided to end its 105-year partnership with the BSA. The strategy of filing for Chapter 11 protection is not uncommon; many religious groups and dioceses have filed for Chapter 11 protections during settlement negotiations with victims. USA Gymnastics also filed for bankruptcy while the organization deals with a mountain of lawsuits related to the Larry Nassar scandal.   

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Severance Fund Created for Former Toys R Us Workers

The private equity firms KKR and Bain Capital, which owned Toys R Us before the company declared bankruptcy, have each pledged $10 million to establish the TRU Financial Assistance Fund, CNBC reports. The firms said the fund is being established to try to provide some financial relief for former employees. The article notes that this is an unusual move by the firms since this is not a requirement under bankruptcy law. Former employees must meet certain requirements in order to be eligible for payments, including being employed by Toys R Us for at least a year, having an annual income between $5,000 and $110,000 and meeting the termination and employment guidelines in the Toys R Us plan. Interested parties will be able to comment on the terms and conditions of the plan during a two-week period. Following the evaluation of comments, the final terms and conditions will be outlined. The claims process is expected to begin on Dec. 15 with the goal of completing payments by April 30, 2019.

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David’s Bridal Files for Bankruptcy

David’s Bridal Inc. filed for Chapter 11 bankruptcy on Monday, Bloomberg reports. The company signed a restructuring support agreement with its main stakeholders before heading to court. Most of the reorganized equity will be given to senior lenders under the agreement. The company plans to keep stores open during the reorganization and hopes to emerge from bankruptcy by early January. 

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CFPB Fines Tennessee Payday Lender for 'Abusive' Practices

Payday lender Cash Express LLC was fined last week by the Consumer Financial Protection Bureau after the agency found several of the firm's debt-collection practices to be in violation of the Consumer Financial Protection Act, The Wall Street Journal reports. The bureau said the Cookeville-based company would deceive customers by threatening legal action over debts that were past the statute of limitations.  Additionally, the bureau said the company told customers it was sending negative information about them to credit-reporting firms, even though it did not send this type of report. The bureau labeled one practice as “abusive,” claiming the company would withhold money from a check-cashing transaction to pay down an outstanding debt, without telling the customer. The company was ordered to pay a $200,000 civil penalty and to return $32,000 to affected customers.

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Gibson Announces New Leaders and Exit from Bankruptcy

Nashville-based guitar company Gibson Brands last week announced a change in leadership as the company emerges from bankruptcy protection, NPR reports. James “JC” Curleigh has been named president and CEO; he will be leaving his role as president of Levi Strauss & Co to take the position with Gibson. Earlier this month, the company’s reorganization plan was approved by the Bankruptcy Court for the District of Delaware, which allowed it to exit bankruptcy and remain in business. Under the approved plan, Gibson will continue to manufacture Gibson and Epiphone guitars and maintain its professional audio business; however, it will discontinue its efforts to expand into home entertainment and headphone categories. The new leadership team will start work on Thursday.

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Tennessee-Based Curae Health Faces More Financial Problems

The Knoxville-based company Curae Health recently filed papers in U.S. Bankruptcy Court in Nashville citing massive losses from one of three Mississippi hospitals it plans to sell, the Associated Press reports. They warned employees of a potential hospital closure if they are unable to transfer ownership quickly. The company is highly concerned that the losses they are experiencing at the Northwest Mississippi Regional Medical Center in Clarksdale has the potential to drag the company under before being able to sell the other two hospitals in Amory and Batesville, Mississippi. At least two groups have expressed interest in taking over the hospital. U.S. Bankruptcy Judge Charles Walker has set a hearing for Oct. 23 on Curae's request for a quick transfer. The auction for the Amory hospital is set for Nov. 15. However, no plans have been released surrounding the sale of the Batesville hospital. The article explains that five rural Mississippi hospitals have closed since 2013.

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Sears Files for Bankruptcy

Sears Holdings has filed for Chapter 11 bankruptcy following its inability to make a $134 million debt payment, which was due Monday, CNN Business reports. The company’s chairman and largest shareholder, Eddie Lampert, gave up the title of CEO. Last month, Lampert proposed restructuring Sears’ finances in order to avoid filing for bankruptcy; however, the creditors instead decided to head to bankruptcy court. With the advent of online shopping and big box stores, Sears has been struggling for several years. The last profitable year for the 132-year-old company was 2010. In addition to the 46 store closings planned for next month, the company will also close 142 stores near the end of the year.

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U.S. Bankruptcy Judge Rules in Favor of Toys 'R' Us

U.S. Bankruptcy Judge Keith L. Phillips ordered Fung Retailing Ltd., a joint venture partner of Toys “R” Us Inc., to drop a court action against the retailer yesterday in Richmond, Virginia, Bloomberg reports. This decision negates a Hong Kong court order to suspend the auction of Toys’ Asia operation, of which Fung owns 15 percent stake. Fung claims it will be harmed by the way Toys is pursuing a sale, while Toys claims Fung is attempting to scare off opposing bidders in order to buy out Toys’ stake at a discount.   

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CEO of Sears Proposes Rescue Plan to Avoid Bankruptcy

Upcoming debt payments and a limited cash flow loom over Sears Holdings Corp. CEO Edward Lampert tells the Wall Street Journal. In order to avoid a bankruptcy filing, Lampert, who is also Sears’s chairman, controlling shareholder and biggest creditor, is encouraging creditors to restructure over $1 billion of debt coming due in the next two years. He also proposes that the Sears board sell an additional $1.5 billion of real-estate and divest $1.75 billion of assets, which would include Sears Home Services and the Kenmore appliance brand.  In August, Lampert made an offer to buy the brand for $400 million in cash, but the board has yet to approve it. His proposal requires approval from multiple stakeholders, including Sears’s independent board committee and bondholders.

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