7/31/25
Objection to sale of Sunnova contracts without ensuring buyer’s liability for customer claims #
The Office of the Illinois, Kansas, Maryland, Michigan, Mississippi Attorneys General and by and through Abigail Rushing Ryan, Bankruptcy Counsel, National Association of Attorneys General objected to the sale of consumer contracts without liens and encumbrances.
FINALLY!
II. LIMITED OBJECTION
1. The undersigned States file this Limited Objection to ensure that the consumer credit contracts are sold pursuant to 11 U.S.C. § 363(o), with the purchaser remaining subject to all claims and defenses related to these consumer credit transactions and contracts, which will allow the undersigned States to continue or initiate litigation against any purchaser of the Debtors’ consumer credit contracts at issue and preserve all remedies that states or private consumers may have related to loans originated based on violations of state or federal law.
2. In addition to applicable state or federal law that preserves claims or defenses concerning consumer credit instruments subject to sale and assignment, 11 U.S.C. § 363(o) states the following concerning section 363 sales of consumer credit contracts:
Notwithstanding subsection (f), if a person purchases any interest in a consumer credit transaction that is subject to the Truth in Lending Act or any interest in a consumer credit contract (as defined in section 433.1 of title 16 of the Code of Federal Regulations (January 1, 2004), as amended from time to time), and if such interest is purchased through a sale under this section, then such person shall remain subject to all claims and defenses that are related to such consumer credit transaction or such consumer credit contract, to the same extent as such person would be subject to such claims and defenses of the consumer had such interest been purchased at a sale not under this section.
3. Accordingly, any purchaser of consumer credit contracts originated pursuant to any violations at issue in the State enforcement matters will be subject to potential claims and defenses.
Such protections are “routinely” included with respect to asset sales pursuant to sections 363(b) and (f). See In re Ditech Holding Corp., 606 B.R. 544, 583 & n. 36 (Bankr. S.D.N.Y. 2019) (citing cases in which 363 sales included 363(o) protections outside the chapter 11 plan context). Consumers may also carry private claims or defenses related to the issues raised in the State enforcement matters that should be preserved.
4. To the extent that Debtors attempt to sell the consumer credit contracts free and clear of liens, claims, encumbrances, interests, or successor liability, the undersigned States object.
5. To obviate this objection, the States request that any order entered approving the Sales Motion include the language that follows:
“Nothing in this Order or the Asset Purchase Agreement releases, discharges, or otherwise relieves the Purchaser of the liabilities set out in section 363(o) of the Bankruptcy Code.”
From the proposed order: #
…
HEREBY ORDERED THAT:
1. 11 U.S.C. § 363(o) applies to this sale of the Debtors’ customer credit contracts and/or transactions;
2. Any order entered approving this sale shall include the following language:
“Nothing in this Order or the Asset Purchase Agreement releases, discharges, or otherwise relieves the Purchaser of the liabilities set out in section 363(o) of the Bankruptcy Code.”
…
Great start. What about the other AGs?
