The same company that in 2007 took out a full page ad in The New York Times to publicize the conspiracy between college financial aid officers and student loan companies, which helped fuel a full-fledged investigation by New York State Attorney General Andrew Cuomo and led to some federal policy crackdowns, including subsidy cuts to lenders, has filed for bankruptcy protection under Chapter 7 of the bankruptcy code. My Rich Uncle, also known as MRU Holdings, Inc., issued a brief press release on February 9 announcing the filing.
The private student loan company, which stopped originating loans in September 2008 because of liquidity problems, listed four times as many liabilities as assets in its Chapter 7 petition, according to bankruptcy court records. Under Chapter 7, a trustee is appointed to sell the company’s assets. The fair market value of My Rich Uncle’s assets is estimated between $1 million and $10 million, according to court documents filed in Manhattan, and the company listed assets of less than $11 million and liabilities of nearly $46 million in its filing.
The company attracted students by offering unconditional 1% upfront discounts on its federal Stafford loans. “It does cut into the margins, but the way we’ve looked at the discount has not been on a single-product basis but more on the lifetime value of the customer,” Raza Khan, former president and cofounder of My Rich Uncle, told Dow Jones Newswires last March. He resigned from the company February 6, according to an SEC filing
As if My Rich Uncle didn’t have enough trouble, in December 2008 one of its former employees, Troy Hill of Jersey City, New Jersey, was charged with embezzling $2.3 million from company accounts.