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Purdue Pharma LP’s bankruptcy judge on Wednesday approved a narrow probe of the OxyContin maker’s corporate governance despite calling part of the request that prompted it “a load of hooey,” Bloomberg News reported. U.S. Bankruptcy Judge Robert Drain approved an investigation into whether the drugmaker’s owners, members of the billionaire Sackler family, have had undue influence on an independent committee of Purdue board members. That so-called special committee reviewed potential lawsuits against the family members and is seeking a settlement instead of litigation. The appointment is the latest twist in a bankruptcy case that has aired the grievances of those affected by the opioid crisis — from states and cities to individuals. By one measure, Purdue is facing legal claims totaling more than $40 trillion, or about double the U.S. GDP in 2020. It’s trying to settle those claims by handing Purdue’s assets to a trust for the benefit of cities and states, who would use the money on opioid crisis abatement. In a contentious five-hour hearing, Judge Drain said there’s no evidence to suggest the board members’ independence has been compromised, but decided the court papers filed to request the investigation were so misleading that a probe is needed to remove any “taint” over the bankruptcy process.

The Flint, Mich., water criminal case involving former Gov. Rick Snyder took a strange side trip yesterday into bankruptcy court where his lawyers asked a judge to penalize state attorneys for distributing confidential documents from Detroit's historic financial restructuring, the Associated Press reported. The documents were related to private talks between Detroit, the state and creditors while the city was trying to emerge from bankruptcy in 2014. Snyder's administration played a key role in groundbreaking deals. Armed with a search warrant in 2019, prosecutors in the attorney general's office obtained documents from computer servers controlled by other state attorneys who had represented Snyder in matters related to Flint's lead-contaminated water. The search apparently swept up sensitive documents from the Detroit bankruptcy as well as attorney-client communications of other state officials, Snyder attorney Charles Ash said. “There has been a massive breach. ... We don’t know how this happened and don’t really know the full extent of the problem," Ash told Bankruptcy Judge Thomas Tucker. The records were given to other people charged with crimes in the Flint water scandal because prosecutors have an obligation to share documents with defense lawyers.

Black people in the U.S. with debt are more likely to file for bankruptcy protection, if they can afford to pay for the cost of filing, than any other racial group, according to studies, researchers and legal experts. Such individuals also are twice as likely among all bankruptcy filers to pick a more costly type of personal bankruptcy, known as chapter 13, studies show, the Wall Street Journal reported. These patterns have created a situation where Black people pay more for bankruptcy, yet are less likely than other households to benefit from the longer process, researchers say. As government aid extended during the pandemic eases, more people of color are expected to face financial distress due to the loss of wages, unemployment or high medical bills, economists and bankruptcy lawyers say. “The racially disparate impact of bankruptcy and the uneven number of filings shows that this pandemic is also having a heavy impact on the finances of Black and Brown Americans,” said Sen. Chris Coons (D-Del.). The main issue, researchers and legal experts say, is the prevalence of racial inequalities affecting personal bankruptcies, a system that is intended to offer debt relief to those in deep financial distress. Bankruptcy trustees, appointed to collect payments from debtors and make distributions to creditors, say that the letter of bankruptcy laws are race neutral and view consumers equally. The federal court system doesn’t collect demographic information — such as race, gender and age — leaving researchers to analyze national bankruptcy trends by using ZIP Codes, census data for individual court districts and surveys. “As long as there’s structural, systemic racism in society, those drivers will continue to push people of color into the bankruptcy system, and they will still be worse off than their white counterparts,” said David G. Peake, a chapter 13 trustee in Houston. Black people who have filed for chapter 13 bankruptcy are less likely to obtain a discharge of their debt, according to a report from the American Bankruptcy Institute’s Commission on Consumer Bankruptcy. Still, they choose to consolidate and restructure their debt under chapter 13, so that they can repay on an installment basis while retaining possession of their homes, cars and other assets. Still, the most popular option for those seeking personal bankruptcy protection is chapter 7 liquidation, a process in which debtors often give up any assets they may have, such as homes and cars, to pay creditors. Chapter 7 allows them to get rid of debts, such as credit card bills, and doesn’t require filing a repayment plan. Most chapter 7 debtors have no assets to offer up, said Robert Lawless, a professor at the University of Illinois College of Law, who also served as the reporter for ABI’s commission on consumer bankruptcy.