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A bankruptcy judge said former students, the U.S. Department of Education and other creditors caught up in Corinthian Colleges Inc.’s collapse can vote on the defunct for-profit college operator’s liquidation plan, the Wall Street Journal reported today. Bankruptcy Judge Kevin J. Carey on Monday signed off on Corinthian’s disclosure document describing how it intends to pay off its creditors. Corinthian’s chapter 11 plan creates two separate trusts to dole out the proceeds from the sale of its assets. One trust will pay claims filed by students, government agencies and the Education Department. It isn’t clear how much Corinthian is on the hook for with its former students. Nearly 350,000 students took out some $3.5 billion in federal student loans to attend one of Corinthian’s campuses since 2010, according to the Education Department. Lawyers representing former students are seeking court permission to file a $2.5 billion claim against Corinthian. Votes on the plan are due Aug. 21. Judge Carey will consider approval of the proposal at a confirmation hearing scheduled for Aug. 26 in Wilmington, Del. Read more. (Subscription required.) 

Looking for a further examination of liquidation and litigation trust issues in bankruptcy? Pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts.

Investors in the growing field of funder-backed litigation, which finances business disputes in exchange for a cut of the proceeds, are eyeing bankruptcy court as a potentially lucrative new venue, the Wall Street Journal reported today. Chilmark Partners, a bankruptcy and restructuring firm, and litigation funder Burford Capital will team up to finance and advise on legal disputes arising out of U.S. bankruptcy cases, Burford co-founder and Chief Investment Officer Jonathan Molot said yesterday. “It just makes sense that there should be an institutional player that can come in and evaluate these claims,” Mr. Molot said of the more than $100 million venture, called Bankruptcy Litigation Funding LLC. In chapter 11 cases, lawsuits are often assigned to trusts, which can opt to pursue them in hopes of winning a judgment or settlement that can be divided among creditors. Without outside funding, these suits might not be able to proceed. “Many times at the end of bankruptcy cases I have seen major creditors stay interested through confirmation and kick important unresolved disputes down the road,” said David Schulte, Chilmark’s managing general partner.

Johnson & Wales University is fighting to keep $46,909 in tuition paid by a Connecticut couple for their daughter’s education against the demands of a bankruptcy trustee, who sued to get that money back, the Wall Street Journal reported today. The private, Rhode Island-based college has asked a bankruptcy judge to throw out the lawsuit that arose when Robert and Jean DeMauro filed for bankruptcy last year. A bankruptcy trustee who examined the DeMauros’ finances argued that the couple didn’t get any benefit from the tuition payments made from March 2011 to December 2013 — their daughter did. The bankruptcy trustee’s lawsuit, filed on April 8, is the latest courtroom battle to unfold over the controversial new lawsuits. Those suits argue that parents who paid tuition for their children before filing for bankruptcy should have used that money to pay down their own growing debts. Read more. (Subscription required.) 

An article in the July ABI Journal examined the issue of trustee clawback lawsuits by parents for college tuition. Click here to read more. 

Since a judge approved its exit financing last month, LightSquared’s path for getting out of bankruptcy now hinges on the Federal Communications Commission giving the nod to transfer LightSquared’s spectrum license to its new owners: JPMorgan Chase & Co., Fortress Investment Group LLC and Centerbridge Partners LP, Bloomberg News reported today. But it lacks the one thing that will be the biggest factor in whether it can survive outside a court’s protection — FCC approval to operate its satellite-based wireless network. The FCC has no deadline to decide on the use of the spectrum, and the Justice Department has asked for time to vet foreign interests in the new ownership structure, leaving it unclear when the license transfer may be decided. 

A group of Democratic lawmakers are proposing a bill that would make it easier for people who got rid of credit card debt using bankruptcy to fix inaccurate credit reports that don't reflect they have earned a clean financial slate, Dow Jones Daily Bankruptcy Review reported today. Sen. Sherrod Brown (D-Ohio) introduced a bill that would force major banks and other creditors to notify credit reporting agencies when a person's debt has been canceled by a bankruptcy judge. It would also punish creditors who ignore a borrower's request to fix an inaccurate record, giving them the power to sue for damages. The bill, called the Consumer Reporting Fairness Act of 2015, comes after several borrowers sued a number of big banks, accusing them of letting poor marks for unpaid debt remain on their credit reports even after the debt was canceled in bankruptcy.

Chinese firms building and bankrolling much of the $3.5-billion Baha Mar mega resort in the Bahamas said today they would invest more to complete the project, where construction has been stalled for months as the project ran out of money, Reuters reported. The incomplete Baha Mar has roiled the fragile economy of the Bahamas, which is counting on the resort to provide 5,000 jobs and a 12 percent boost to its gross domestic product. China Construction America (CCA) said that it was prepared to invest an additional $100 million in Baha Mar. A unit of China State Construction Engineering Corp Ltd, CCA said it also had offered to provide a $175 million guarantee to China's Export Import Bank in connection with the bank's offer of a new $200 million facility to Baha Mar Ltd, the resort's developer.

The trustee liquidating the bankrupt brokerage unit of Jon Corzine's MF Global Holdings Ltd. on Friday announced an agreement that would enable unsecured creditors to recoup nearly everything they are owed, and largely conclude the unit's nearly four-year liquidation, Reuters reported on Friday. Trustee James Giddens said that he would sell various claims held by the MF Global Inc. brokerage, including claims against Corzine, who was chief executive of MF Global, and other officials, to the plan administrator overseeing the parent's chapter 11 case. The administrator would in exchange give up claims in the brokerage's bankruptcy. Giddens said that the agreement would add $186 million to the brokerage's bankruptcy estate, and let him pay unsecured creditors a total of 94 percent to 95 percent on their claims, including the nearly $1 billion they have already received.

A lawyer for the former RadioShack Corp. said that the company has made significant progress toward wrapping up its bankruptcy case, but a handful of potential roadblocks remain, The Wall Street Journal reported yesterday. During a hearing, lawyers for the electronics retailer told Hon. Brendan L. Shannon that the former RadioShack and its creditors have reached an agreement on the general terms of a settlement that would provide funding for its chapter 11 plan and cover mounting administrative expenses such as legal fees. The agreement resolves a bid by Salus Capital Partners LLC to shut down the electronics retailer’s restructuring efforts in favor of a chapter 7 liquidation. Salus, a hedge fund owed $150 million, had previously said that what remains of RadioShack can be dealt with more efficiently in chapter 7, which would oust teams of expensive lawyers and advisers and replace them with a trustee. Some of the finer points of the settlement haven’t yet been worked out, and any formal deal will be subject to final court approval.

Taxi tycoon Evgeny Freidman filed for chapter 11, claiming that he's taken a huge hit from Uber and other app-driven competitors, the New York Daily News reported yesterday. He sought protection for 22 companies that control 46 medallions worth nearly $50 million, court papers show. In the court filing, Freidman rails against competition from Uber, saying that creditors like Citibank were "concerned about the effect that Uber and other nontraditional ride-sharing companies would have on the traditional medallion based taxi business model." Citibank has been trying to seize the medallions through litigation over millions in unpaid loans. Freidman, whose 900 medallions make him the taxi king of New York, has seen their value plummet with the rise of app-boosted livery services like Uber.

Tens of thousands of student loan borrowers will receive refunds from Discover Financial Services after the government slapped the firm with $18.5 million in penalties for overstating the amount of money people owed and illegally harassing them to repay their debt, The Washington Post reported yesterday. In its first action against a student lender, the Consumer Financial Protection Bureau on Wednesday said Discover listed higher minimum payments than the ones outlined by the original terms of the loans. The government agency also said the company denied consumers information needed to get a tax deduction for the interest paid on their loans. The company is also accused of illegally calling borrowers at all hours and failing to provide them information about the amount and source of their debt. Under the agreement, Discover will return $16 million to consumers. About 130,000 people will be reimbursed up to $300 to amend their 2011 or 2012 tax returns to claim the student loan interest deductions or receive an account credit of $75 for each tax year. Roughly 5,200 borrowers who were misled about the minimum payments will receive a check or account credit for up to $500. And 5,000 people will either get $92 for receiving five to 25 unlawful collection calls or $142 for more than 25 calls.