What does the bankruptcy of CACH (Square Two) mean for collection suits and FDCPA suits?
A practical explanation of what it means that CACH has filed bankruptcy
On March 19, 2017, CACH (through Square Two Financial Services Corporation) filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York, Case No. 17-10663, and jointly administered under In re Square Two Financial Services Corporation, et al., Case No. 17-10659.
OK in simpler terms, CACH went bankrupt.
What in the world does this mean, especially if you have been sued by CACH or you have sued CACH?
CACH has filed for bankruptcy protection
CACH felt that its debts were too much to handle and it needed protection from its creditors. So it went to bankruptcy court to get that protection. Instead of a Chapter 13 (debtors court) or Chapter 7 (straight bankruptcy), CACH filed a Chapter 11 bankruptcy.
This is what businesses often file.
What CACH is trying to do is stop its creditors from overwhelming it and it is seeking (apparently) to sell its assets (debts from consumers) to Resurgent.
Resurgent is the parent company of LVNV Funding, LLC which sues quite often in Alabama.
When anyone files bankruptcy, the normal rule is everything court related must stop or be “stayed” until the bankruptcy judge can sort out what will happen to CACH.
So….
If you have been sued by CACH, it means that your lawsuit should be “stayed”
The lawyer for CACH should let the court know but if they don’t, then you can let the court know about the bankruptcy.
The typical filing in court is called a “Suggestion of Bankruptcy” and it will list the date and case number of the bankruptcy filing.
Normally judges will “freeze” or “stay” the case to see what will happen next. Some may even dismiss the lawsuits but the normal course is to stay the cases.
Will someone else — such as LVNV — take over the lawsuits?
Too early to know how this will be handled in Alabama but we’ll update this when we have more feedback. We are seeing CACH take the position it can continue with lawsuits. Right now still too early to know what judges will do with this. I still suggest you (or your attorney) consider filing a notice of bankruptcy — no harm and judge might stay or toss the case.
But what about if you have sued CACH for breaking the FDCPA (Fair Debt Collection Practices Act) etc?
If you have sued CACH, your lawsuit will be “stayed” or even dismissed
CACH will file a “suggestion of bankruptcy” to let the court know that nothing should happen in the case as CACH is in bankruptcy.
This should “stay” the case as your judge looks to guidance from the bankruptcy court.
Some judges will even dismiss the case but give you the right to reinstate your case if appropriate.
Will CACH have any assets to pay for your lawsuit? How will the assets be divided up between your case and the other creditors of CACH?
In a sense, you are now a creditor of this debt buyer.
Presumably there are limited funds that CACH has — limited assets — so how those will be divided up remains to be seen.
So what should you do right now?
Get with your lawyer. You want to make sure a suggestion of bankruptcy is filed in your case. And then you need to monitor the bankruptcy case to see if there are any developments that impact you. Or if you need to file anything in the bankruptcy court.
And.
Unfortunately.
You wait.
Everyone has the right to file bankruptcy. It is not right for these debt buyers such as CACH or LVNV or Midland to be mad at you for exercising your right to file bankruptcy.
And in the same way we can’t be upset at them for filing bankruptcy.
It obviously looked hard at the situation and decided bankruptcy is the best option so we’ll have to see how it plays out.
Only contact us if you are in Alabama and do NOT have an attorney
If you have an attorney, they will answer your questions for you. If you are outside of Alabama, we can’t help you, even if you don’t have a lawyer.
But if you are in Alabama without a lawyer, feel free to call us at 205-879-2447 and we can help you think through your options. Or fill out our contact form and we’ll get right back with you.
Best wishes!