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Exiled Chinese businessman Guo Wengui has said that he will drop his personal bankruptcy case because he says he does not have the money to cover the associated legal costs, Reuters reported. Guo, the former real estate magnate who fled China for the U.S. in 2014 ahead of corruption charges, said in court papers filed on Wednesday that he would not contest a call for his chapter 11 case to be thrown out by a fund that loaned money to Guo's companies. The lender, Pacific Alliance Asia Opportunity Fund (PAX), moved to dismiss the bankruptcy in April, arguing that Guo had only filed to avoid paying fines. Guo said he filed to resolve all of his issues with his creditors. Guo filed for bankruptcy in Connecticut in February after a New York court ordered him to pay PAX $254 million stemming from a contract dispute. PAX had initially loaned two of Guo’s companies $100 million in 2008 for a construction project in Beijing and sued Guo when he failed to pay off the loan. Guo, who also goes by Ho Wan Kwok, said in Wednesday’s filing that he could no longer afford the legal costs of the bankruptcy, blaming PAX for waging “unrestrained legal warfare” in its effort to reach assets, including a New York penthouse and a luxury yacht. Guo says that he does not own either asset, and they actually belong to his children.

A federal appeals court ruled on Wednesday that payments individuals owe to the Internal Revenue Service for failing to obtain health insurance under the Affordable Care Act should be given priority in bankruptcy, Reuters reported. The U.S. Court of Appeals for the Third Circuit affirmed a lower court's ruling that payments owed to the IRS are entitled to be paid off before other debts in a Chapter 13 bankruptcy because they qualify as taxes. The decision came in the case of a Pennsylvania couple who filed for bankruptcy in 2019 owing $927 to the IRS for failing to obtain health insurance as required by the ACA. The individual mandate of the landmark healthcare law had required Americans to obtain health insurance or make a so-called "shared responsibility payment," but that requirement was eliminated for individuals in late 2018. Wednesday's decision was the first precedential opinion on the issue from an appeals court, but mirrors findings from a similar ruling from the Bankruptcy Appellate Panel of the 6th Circuit in March.

The Biden administration is reportedly considering expanding its efforts at targeted student debt forgiveness into a broader policy whereby “at least” $10,000 (some have advocated for up to $50,000) in student loans per borrower, possibly subject to an annual income cap, would be eligible for cancellation. There is a rough consensus that rising levels of student-loan debt are a problem, and proponents of debt relief note the aggregate amount outstanding has increased by roughly two-thirds over the past 10 years to a total of some $1.7 trillion. Largely overlooked in the debate are changes made to the U.S. Bankruptcy Code in 2005, which materially increased the difficulty of discharging student loans in bankruptcy, according to a commentary by Richard J. Shinder of Theatine Partners in today’s Wall Street Journal. The “undue hardship” standards that apply to the cancelation of student loan indebtedness create a high hurdle for discharge, as borrowers must meet various tests adopted by the courts. The difficulty in satisfying these requirements, along with the costs associated with filing for bankruptcy, results in little student debt being relieved in this manner. Unfortunately, the 2005 changes to the Bankruptcy Code, combined with the 2010 federalization of the student-loan market, have placed what is fundamentally a commercial matter — the repayment of financial obligations — squarely within the ambit of public policy. Initially as guarantor and now as lender to student borrowers, the federal government has a direct seat at the table. Having largely prohibited the resolution of student loans in bankruptcy subjects its ultimate disposition to political caprice. Read more. (Subscription required.) 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.