Cottonwood Financial: Cash Store Payday Lender Sold to Check 'n Go Operator

Cottonwood Financial Ltd., the consumer finance company behind the Cash Store brand, filed chapter 11 on February 25, 2024 in the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division. The company said it served roughly 43,000 active customer accounts and held about $32.6 million in receivables at the time of its filing, with 181 storefront locations across Texas, Idaho, and Wisconsin and a workforce of 537 employees. The chapter 11 case pursued a section 363 sale and a plan that was confirmed on August 7, 2024, with the plan becoming effective on August 22, 2024.

The restructuring paired a debtor-in-possession financing and cash collateral framework with a rapid sale of substantially all assets. Court filings show a prepetition capital stack anchored by a Main Street secured loan and a larger subordinated loan, along with several million dollars of general unsecured trade claims. The sale order identified Axcess Financial Holdings, Inc. as the purchaser. A separate transaction announcement by Oppenheimer described the buyer as CNG Holdings, which operates the Check 'n Go payday lending brand. The plan provided recoveries for priority and secured creditors but no distributions for general unsecured creditors.

Debtors	Cottonwood Financial Ltd.; Cottonwood Financial Administrative Services, LLC; Cottonwood Financial Texas, LLC; Cottonwood Financial Idaho, LLC; Cottonwood Financial Wisconsin, LLC
d/b/a	Cash Store
Court	U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division
Case Number	24-80035 (SWE)
Judge	U.S. Bankruptcy Judge (SWE)
Petition Date	February 25, 2024
Plan Confirmation	August 7, 2024
Effective Date	August 22, 2024
Case Posture	Plan confirmed; effective date noticed; motion for final decree filed December 5, 2024
Employees (at filing)	537
Locations (at filing)	181 retail locations in Texas, Idaho, and Wisconsin
Active Customer Accounts	Approximately 43,000
Receivables (at filing)	Approximately $32.6 million
Purchaser	Axcess Financial Holdings, Inc. (sale order)
DIP Facility	Up to $9.0 million aggregate (priming line of credit and term loan)
Prepetition Secured Debt	About $26.74 million Main Street loan
Subordinated Debt	About $38.16 million
Unsecured Trade Debt	About $4 million
Claims Agent	Epiq Corporate Restructuring, LLC
Debtors' Counsel	Gray Reed
Financial Advisor / CRO	HMP Advisory Holdings, LLC d/b/a Harney Partners
Investment Banker	Oppenheimer & Co. Inc.
Special Counsel	Alston & Bird LLP

Restructuring Path, DIP Financing, and Case Status

Cottonwood Financial and its affiliates sought chapter 11 protection to stabilize liquidity and pursue a court-supervised sale. The restructuring timeline moved quickly. The debtors filed in late February 2024, obtained an interim DIP and Cash Collateral Order on February 29, and received a final DIP and Cash Collateral Order on March 22. The same March 22 hearing produced a Bidding Procedures Order that set the framework for a sale process. The Sale Order approving a transfer of substantially all assets was entered on May 13. The debtors filed a Disclosure Statement and Chapter 11 Plan on June 14, followed by a solicitation order on July 1 and a modified plan and updated disclosure statement on July 2. The court entered a Confirmation Order on August 7, and the debtors filed a Notice of Effective Date on August 22.

DIP facility size and structure. The DIP Motion sought approval for up to $9.0 million in aggregate, combining a priming line of credit and a term loan. The interim order allowed initial draws up to $2.0 million, net of a 3% original issue discount. The final order authorized additional draws of up to $7.0 million, also net of the 3% original issue discount. The DIP obligations were secured by liens on substantially all prepetition and postpetition property, including priming liens under section 364(d), subject to a carve-out and adequate protection provisions for the prepetition secured lender.

Adequate protection and lien structure. The Final DIP Order granted liens on nearly all assets and proceeds, including a priming lien framework that was coupled with adequate protection for the prepetition secured lender. Court filings describe a customary carve-out and a set of protections for potential diminution in collateral value, as well as fee and expense protections for the prepetition lender. The DIP facility could be repaid without penalty but was non-revolving, meaning repaid amounts could not be reborrowed.

Case posture and end-state. The plan confirmed in August 2024 contemplated a liquidating outcome following the sale. Secured creditors received sale proceeds and residual estate cash, while general unsecured creditors received no distribution under the plan. The debtors filed a Motion for Final Decree on December 5, 2024, signaling a move toward formal case closure.

Professional team and claims administration. The restructuring relied on a standard professional roster for a mid-size retail finance case. The debtors retained Gray Reed as bankruptcy counsel, HMP Advisory Holdings, LLC d/b/a Harney Partners as financial advisor and CRO provider, Alston & Bird LLP as special counsel, and Oppenheimer & Co. Inc. as investment banker. The court authorized Epiq Corporate Restructuring, LLC to serve as claims, noticing, and solicitation agent effective as of the petition date per its retention application, with responsibilities that include maintaining the claims register and distributing case notices. This structure supported a rapid sale and a plan process that moved from filing to an effective date within roughly six months.

Business Overview and Cash Store Footprint

Cottonwood Financial operated a retail consumer finance platform under the Cash Store brand. The company described itself as a privately held lender focused on small-dollar credit products, with storefront locations complemented by online account management. A transaction announcement by Oppenheimer stated that Cottonwood was founded in 1996 and had 181 branch locations across Texas, Idaho, and Wisconsin at the time of its chapter 11 filing. The same source reported 537 employees, about 43,000 active customer accounts, and $32.6 million in receivables.

Core products. Court filings and industry coverage describe a product mix centered on short-term and installment lending, including single-payment cash advances, installment cash advances, and title loans. The maximum loan sizes were up to $3,000 for single-payment and installment cash advances and up to $25,000 for title loans.

Store network contraction. The 2020 CFPB consent order described a larger retail footprint spanning multiple states, including Illinois, Michigan, New Mexico, Utah, and Wisconsin, with about 340 retail outlets. That historical snapshot suggests a material contraction by the petition date, when the company reported 181 locations limited to Texas, Idaho, and Wisconsin. The same CFPB order listed Irving, Texas as the corporate headquarters. The contraction in store count provides context for the CRO declaration's focus on fixed overhead that did not scale down with reduced volumes.

Historical footprint and headquarters. A 2020 CFPB consent order described Cottonwood Financial as headquartered in Irving, Texas and operating about 340 retail outlets across Idaho, Illinois, Michigan, New Mexico, Texas, Utah, and Wisconsin. That broader footprint highlights the degree of contraction by the petition date, when the company reported 181 locations limited to Texas, Idaho, and Wisconsin.

Brand and operating model in Texas. Prior reporting on Cash Store noted its use of the Credit Services Organization model in Texas, where CSOs arrange loans from third-party lenders while charging separate fees. That model ties Cottonwood's operations to a regulatory framework that is distinct from direct lending statutes and often central to policy debates in the state.

Industry and Regulatory Context for Small-Dollar Lending

The U.S. small-dollar lending market remains a niche but material part of consumer credit. Federal Reserve research published in July 2024 estimated $1.4 billion in outstanding small-dollar loan balances across 2.7 million accounts at the end of 2023. The same study reported a median loan balance of $507 and a median monthly payment of $89, with 95% of balances held by nonprime borrowers and 70% held by subprime borrowers. Finance companies held roughly 60% of those balances and exhibited delinquency rates materially above banks, with a 14.5% delinquency rate.

Payday lending contraction and consolidation. Market research indicates that single-payment payday loan volume fell from $46 billion in 2013 to $25 billion in 2019, followed by an additional decline during the pandemic. The same research points to a shift toward online lending and a market dominated by a small number of large operators. A separate industry data compilation estimates more than 14,000 payday lending establishments nationwide, with the top 50 lenders controlling about 65% of market share and a 27% decline in the number of unique lenders since 2020. These metrics underline a market that has consolidated as smaller operators faced higher compliance and technology costs.

Borrower profile and demand drivers. The Dallas Fed reported that 67% of payday borrowers cited unexpected expenses, cash flow timing gaps, or income shortfalls as the reason for taking out a loan. The same report cited survey evidence that 47% of Americans would struggle with a $400 unexpected expense, highlighting the demand pressures that sustain small-dollar lending despite regulatory constraints. These borrower characteristics are central to the cash flow dynamics of the sector and influence loss rates during economic stress.

Complaint data in Texas. A Texas Tribune report documented about 220 consumer complaints to the Texas Office of Consumer Credit Commissioner since 2005 about small-dollar lenders, with allegations of interest and fees exceeding 500% APR and abusive collection practices. The article also cited an example in which a $1,500 Cash Store loan cost $2,362.23 over five months, a 612% APR. While the complaint data predates the filing by many years, it provides historical context for the regulatory and reputational pressures that have shaped the industry in Texas.

Texas regulatory framework and the CSO model. Texas uses a Credit Services Organization framework that allows payday lenders to operate as brokers rather than direct lenders. A Texas Secretary of State primer notes that CSOs must register annually under the Texas Finance Code and that the secretary of state acts as the filing officer but does not regulate business practices or resolve disputes. The Texas State Law Library similarly highlights the Texas Office of Consumer Credit Commissioner as the principal state regulator for businesses offering small payday loans.

Consumer advocacy materials describe how the CSO model grew after a 2004 Fifth Circuit decision held that CSO fees were not attributable to interest for usury purposes, and how Texas later required CSOs to obtain Credit Access Business licenses beginning in 2012. Those materials also document a local ordinance movement in which 49 Texas cities adopted rules requiring principal reductions per payment.

Pricing and refinance dynamics. A Dallas Fed report on payday lending in Texas found average annual percentage rates above 600% and reported that most loans involved principal amounts between $250 and $500. The report also noted that fees and refinances accounted for a large share of industry revenue, and that borrowers often refinanced multiple times before payoff.

Regulatory scrutiny and enforcement. The CFPB issued a consent order against Cottonwood Financial in April 2020, requiring $286,675.64 in consumer redress and a $1.1 million civil penalty for violations of the Consumer Financial Protection Act, Fair Credit Reporting Act, and Truth in Lending Act. A March 2025 Texas OCCC order also lists Cottonwood Financial Texas LLC as the subject of a state regulatory action. Separately, a Goodwin review of 2024 small-dollar lending enforcement activity noted 15 enforcement actions and $63 million in recoveries, with additional CFPB payment-authorization rules scheduled for March 2025.

Adjacent credit products. The same Goodwin review cited data showing that 17% of consumers with credit records used buy-now-pay-later products at least once during 2021-2022, illustrating how borrowers in the broader consumer finance market often rely on multiple short-term credit channels.

Distress Drivers Cited in Court Filings

The debtors' First Day Declaration and related filings point to a combination of demand shifts, regulatory constraints, and credit performance pressures that reduced store-level profitability.

COVID-era demand shift away from in-store lending. The company stated that demand moved away from in-store lending during the pandemic, reducing traffic at brick-and-mortar locations. That shift eroded the economics of store-heavy operations and increased the importance of digital servicing.

Regulatory constraints in Texas. Court filings cited local ordinances and the Texas regulatory framework as constraints on the business model, particularly as the company sought to scale down overhead after store closures. The cash store model was tied to the CSO framework in Texas, a structure that has been the focus of sustained legislative and local scrutiny.

Elevated bad-debt rates. The CRO declaration pointed to increased delinquencies and charge-offs in the loan portfolio, which reduced cash collections relative to operating costs.

Overhead that did not scale down. The filings noted that fixed costs did not decline in proportion to store closures, leaving the company with a cost structure that outpaced revenue.

Trade vendor arrearages. The debtors reported that trade vendors were roughly 60 days in arrears at the petition date, a signal of tightening liquidity.

The 2020 CFPB enforcement action is part of the broader regulatory backdrop. The consent order required a combined $1.39 million in consumer redress and civil penalties, including $286,675.64 in consumer redress and a $1.1 million civil penalty.

Capital Structure, Claims, and Plan Treatment

Cottonwood Financial entered chapter 11 with a capital structure dominated by secured and subordinated loans, plus a smaller tranche of unsecured trade payables. The prepetition secured debt was a Main Street loan originated on December 9, 2020 with Third Coast Bank, SSB and secured by first-priority liens on substantially all assets, with a stated maturity on December 9, 2025. The subordinated loan was executed on July 5, 2022, with borrowing capacity later increased on July 5, 2023, and the balance included capitalized interest. Unsecured trade claims were estimated at about $4 million.

Plan class structure and recoveries. The confirmed Chapter 11 Plan divided claims into six classes, with priority non-tax claims left unimpaired and paid in full from a reserve. The prepetition secured lender's secured claims were impaired but received a combination of cash at closing and remaining estate cash after the effective date, along with an assignment of retained causes of action and residual cash after a final decree. Other secured claims were to be satisfied by collateral, with any deficiency rolling into the general unsecured class. General unsecured claims received no distribution. Intercompany claims and equity interests were cancelled without recovery.

Liquidity waterfall mechanics. The plan's payment sequence reflected a liquidation waterfall common to sale-driven chapter 11 cases. Priority claims were earmarked for a dedicated reserve. Secured creditors were entitled to sale proceeds and remaining cash after the effective date, while unsecured trade creditors were structurally junior to the secured lender and therefore out of the money given the sale valuation. This structure helps explain the plan outcome: a full recovery for priority claims, partial recovery for secured claims, and no distribution to general unsecured creditors.

Release and exculpation framework. The Confirmation Order approved release and exculpation provisions typical of a liquidating plan. The plan structure combined sale proceeds, remaining cash, and retained causes of action to fund distributions.

Section 363 Sale Process and Purchaser

The case moved quickly into a sale process. The Bidding Procedures Order entered on March 22, 2024 established the bid deadline, auction mechanics, and sale hearing schedule. The Sale Order entered on May 13 approved a transfer of substantially all assets free and clear of liens, claims, and interests.

Purchaser identity. The sale order identified Axcess Financial Holdings, Inc. as the purchaser under the asset purchase agreement. In a separate transaction announcement, Oppenheimer described the buyer as CNG Holdings and noted that the business operates the Check 'n Go, Xact, Allied Cash Advance, and Smartpay brands with more than 300 retail locations. Check 'n Go operator This dual-source description reflects the legal purchaser in the sale order and the brand identity referenced in public transaction materials.

Sale consideration. The sale order allocated cash consideration across debtor entities, including $2.0 million in cash assigned to the Idaho and Wisconsin assets and $1.0 million in cash plus other consideration for the Texas assets. Assumed contracts and assumed liabilities were addressed in the order, with cure costs determined under the asset purchase agreement.

Assumption and assignment mechanics. The sale order authorized the assumption and assignment of designated contracts and leases, subject to cure amounts and objection procedures. This framework allowed the purchaser to take on specific operating assets while leaving excluded liabilities in the estate. The distinction between assumed and excluded liabilities informed the plan's liquidation design and the resulting distribution priorities.

Timing of closing. The Oppenheimer announcement stated that the sale was completed in August 2024. sale completed in August 2024 The closing timing aligned with the plan confirmation and effective date schedule that followed shortly thereafter.

Key Case Timeline

Frequently Asked Questions

What did Cottonwood Financial do?

Cottonwood Financial operated the Cash Store payday and consumer finance brand, with 181 retail locations across Texas, Idaho, and Wisconsin at the time of its filing. The company offered single-payment cash advances, installment cash advances, and title loans, and reported about 43,000 active customer accounts with $32.6 million in receivables.

When did Cottonwood Financial file for chapter 11?

The debtors filed chapter 11 petitions on February 25, 2024 in the Northern District of Texas, Dallas Division.

Why did Cottonwood file for bankruptcy?

Court filings cited a mix of pandemic-era demand shifts away from in-store lending, regulatory constraints in Texas that affected the operating model, elevated bad-debt rates, and fixed overhead costs that did not scale down with store closures.

Who bought Cottonwood's assets?

The sale order identified Axcess Financial Holdings, Inc. as the purchaser. A separate transaction announcement described the buyer as CNG Holdings, which operates the Check 'n Go, Xact, Allied Cash Advance, and Smartpay brands with more than 300 retail locations.

How much debt did Cottonwood have at the petition date?

Court filings reported approximately $26.74 million in Main Street secured debt, about $38.16 million in subordinated debt, and around $4 million in unsecured trade debt, for total obligations near $69 million.

What did secured and unsecured creditors recover?

Under the confirmed plan, the prepetition secured lender received $1.3 million at the sale closing and was entitled to remaining estate cash after the effective date, plus retained causes of action and residual cash after a final decree. General unsecured creditors received no recovery.

How large was the consumer finance market Cottonwood operated in?

Federal Reserve research estimated $1.4 billion in outstanding small-dollar loan balances across 2.7 million accounts at the end of 2023, with finance companies holding about 60% of those balances.

What regulatory actions involved Cottonwood Financial before and after the filing?

The CFPB issued a consent order in April 2020 requiring $286,675.64 in consumer redress and a $1.1 million civil penalty. A March 2025 Texas OCCC final order lists Cottonwood Financial Texas LLC as the subject of a state regulatory action.

How did the Texas CSO model shape the business environment?

The Credit Services Organization framework in Texas allows CSOs to register and operate as brokers for third-party loans, and it has been used by payday lenders to structure fees outside traditional usury calculations. Consumer advocacy materials trace the model's expansion after a 2004 Fifth Circuit ruling and note the later adoption of Credit Access Business licensing requirements.

Who is the claims agent for Cottonwood Financial Ltd.?

Epiq Corporate Restructuring, LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more bankruptcy case analyses and restructuring insights, visit ElevenFlo's bankruptcy blog.