Jackson Hewitt Tax Service Inc. received court approval for their reorganization plan on August 8, 2011, which the company hopes will allow for its exit from bankruptcy before the week is over.
U.S. Bankruptcy Judge Mary Walrath confirmed the Chapter 11 restructuring plan for Jackson Hewitt in Wilmington, Delaware. The company is the nation’s second largest tax preparer. The company filed for bankruptcy protection in May, 2011.
The company has a total of $357 million in outstanding debt that they owe to lenders. Jackson Hewitt is offering ownership of the company and a $100 million term loan under the reorganization plan. Existing stockholders will be offered nothing under the plan.
Court papers estimate the company’s worth at $225 million, and lenders will be providing a $115 million loan to keep the company running until the next tax season begins.
A majority of the company’s unsecured creditors are plaintiffs in class-action lawsuits that challenged Jackson Hewitt’s practice of issuing loans based on customers’ anticipated tax returns. Critics have accused the company of violating consumer-protection statutes with the offering of high-interest rapid refunds to tax filers. The IRS stopped providing tax preparers with advance warnings of filers whose returns could be at risk, making the offering of the refund loans untenable and ending the practice.
Benjamin Brand Services – Chicago bankruptcy lawyer