💥New Chapter 11 Bankruptcy Filing - CashCall, Inc.💥
Personal loan provider files chapter 11 with atypical facts and circumstances
The facts of this case are … um … unique.
On July 20, 2026, La Jolla, CA-based CashCall, Inc. (the “debtor”) filed a chapter 11 bankruptcy case in the Southern District of California (Judge Marum). Founded in ‘03, the debtor’s business is providing unsecured personal loans to people with poor credit history. Or was, it originated its last loans in March ‘26 and fired its last employee in June ‘26, down from a high of ~1.1k.
Anyway, we’re talking poor credit here, so clearly the loans were uber expensive and default rates were high. Like, holy sh*t were they expensive. Here’s J. Paul Reddam, the debtor’s founder, sole shareholder, and CEO:
“Initially, the Debtor offered $10,000 loans at 24%-39% interest … To broaden its market, the Debtor began to offer additional loan products, including $5,000 loans at interest rates of 47%-59%, and starting in late 2004, a loan of $2,600 at a 79% interest rate and maximum term of 42 months …
To maintain profitability on these risky loans (default rates exceeded 45%), the Debtor eventually raised interest rates to 96%. While the Debtor targeted 15%-20% profits on the $2,600, it was only ever able to achieve about 7-8% profit…
However, as default rates spiked in the wake of the 2008 recession, the Debtor was forced to raise interest rates on its $2,600 loans to up to 135% by July 2009. During this time, the default rate on loans made by the Debtor exceeded 50%.”
The cases flow from those rates and loan-structuring. There has been mucho litigation:
📍In July ‘08, a putative class filed a case against the debtor alleging those rates ☝️, although not then-capped by state law,* were “… unconscionable,” which over the course of fifteen years round its way through California state and federal courts before the state court certified a class of “… 119,844 class members …” encompassing “ … 133,848 loans …” and ordered the debtor to pay ~$245.5mm in restitution, which was held up on appeal in February ‘26.
📍In December ‘13, the Consumer Financial Protection Bureau (the “CFPB”) sued the debtor and Mr. Reddam, arguing that one of the debtor’s lending models — under which it effectively routed loans through sovereign tribal lands — was very much no bueno. Despite the debtor having obtained the advice of legal counsel in orchestrating the structure, the CFPB was determined to have been right. After appeals and subsequent remands in that lawsuit, the district court entered judgment in favor of the CFPB and imposed a $33mm civil penalty and $134mm in restitution, offset by $10mm for an earlier payment made during the course of the case. The debtor also appealed that, but the Ninth Circuit affirmed in April ‘25 and the Supreme Court closed the door in March ‘26.
📍Which brings us back to that advice of counsel. It created two more suits. In ‘17, the debtor filed a malpractice suit against its former counsel, which settled in ‘21. However, the debtor is organized as an S-corp. and therefore doesn’t pay any direct income taxes. Instead, they flow up to Mr. Reddam, who needed and was provided a chunk of change to kick over what was owed to Uncle Sam. That’s where the second suit comes in: one of the class reps didn’t like the upstreaming from the debtor and sued to claw it back in August ‘24. Mr. Reddam and the debtor filed motions for summary judgment, but a week before the bankruptcy, the court ruled against each.
Ergo, the bankruptcy, which, among other things, placed the clawback action in the hands of the estate, where it represents, by far, the largest asset. It’s worth upwards of $45mm, and the second largest asset is a ~$1.5mm loan portfolio.
At this point, you might be thinking, “yeah, but there’s no way the debtor will sue its owner, founder, and CEO for the cash …” to which it replies:
Seeing that its business didn’t work any more, in 2Q26, the debtor brought on Manatt, Phelps & Phillips, LLP (Patrick DuBois, Schuyler Carroll) and Dundon Advisers, LLC (Matthew Dundon) as advisors and installed Craig Jalbert as an independent director. Sometime between then and the petition date, the debtor also rung up Leslie Gladstone (of Financial Law Group) to serve as CRO, and those folks are fully in control of the cases and intend to pursue the action against Mr. Reddam.
Who, to his credit, still isn’t walking away from the business. Through Absolutely Zero Corporation (“AZC”), Mr. Reddam tried to supply the debtor with a $3.995mm DIP ($1.3mm interim) on unbelievable terms. Interest is at SOFR plus … well … nothing. Just SOFR. There’s also zero fees and zero releases.
Buuuuuuuuttttt it does include a lien on all estate causes of action, which pissed off the US Trustee (the “UST”) and the CFPB. As we noted above, the debtor isn’t operating any more and doesn’t have any employees, so in their view, it doesn’t need any cash, let alone an insider DIP. Moreover, the UST ain’t on board with the DIP amount because it greatly exceeds the value of the loan portfolio.
The debtor, however, wasn’t dissuaded. On July 20, 2026, it filed a reply justifying the DIP because Messrs. DuBois, Carroll, Dundon, and Jalbert, as well as Ms. Gladstone, don’t intend to work for free and the UST kinda failed to mention the fraudulent transfer asset altogether, which the lot of them thinks has real value.
Does it? We have no clue. But you have to admit, these are a novel set of circumstances.
The court held the first day hearing on July 24, 2026. Which seemed to have gone … not great. For the DIP at least; the docket suggests the UST’s and CFPB’s arguments resonated with Judge Marum. Instead of the interim $1.3mm, he limited the borrowings to $300k and scheduled the second day hearing for August 26, 2026 at 11am CT, which means, during the interim four weeks, the debtor’s professionals will almost certainly have to go without a cumulative ~$290k budgeted for the carveout account. Likely a few other creditors too — based on the budget, the debtor is going to be riding into that hearing on fumes.
The debtor is represented by Manatt, Phelps & Phillips, LLP (Schuyler Carroll, Patrick DuBois) as legal counsel, Dundon Advisers, LLC (Matthew Dundon) as financial advisor, and Financial Law Group (Leslie Gladstone) as CRO. Craig Jalbert is the debtor’s independent director. AZC is represented by Marshack Hays Wood LLP (Aaron de Leest) as legal counsel.
*Presently, California caps $2.5k-$10k loans at 36% interest.
Company Professionals:
Legal: Manatt, Phelps & Phillips, LLP (Patrick DuBois, Schuyler Carroll)
Financial Advisor: Dundon Advisers, LLC (Matthew Dundon)
Independent Director: Craig Jalbert
Claims Agent: Verita (Click here for free docket access)
Other Parties in Interest:
Insider DIP Lender: Absolutely Zero Corporation
Legal: Marshack Hays Wood LLP (Aaron de Leest)