Several high profile bankruptcies have occurred in recent years. Most would consider a bankruptcy proceeding a last resort. But some, seeking to expunge a debt, have contemplated that bankruptcy may be a safe way to avoid the long-arm of the law. The Federal Trade Commission, however, has taken great steps to ensure that an FTC judgment firmly stays on a wrongdoer’s balance sheet. In late December of last year, the FTC convinced a bankruptcy court that a party subject to a contempt order could not shield itself from the FTC’s collection efforts by filing for bankruptcy.
First, a little background: In 2008, the FTC settled its lawsuit against BlueHippo Funding LLC, BlueHippo Capital LLC (together, “BlueHippo”), as well as the sole owner of both companies, Joseph Rensin. The FTC alleged that the defendants offered to finance the sale of personal computers to consumers with low credit ratings, and that they violated, among other laws, the FTC Act by failing to clearly disclose that consumers’ payments were not refundable. BlueHippo agreed to a settlement that included a monetary judgment of at least $3.5 million and up to $5 million. The order also prohibited the defendants from making any representation regarding any refund policy “without disclosing clearly and conspicuously, prior to receiving any payment from customers all material terms and conditions” of any refund. Mr. Rensin was not a party to the order.