Galindo Law Firm Files Chapter 11 Amid $50M Lien Fight

Cristóbal M. Galindo, P.C. d/b/a Galindo Law Firm (GLF) filed a voluntary chapter 11 petition on August 24, 2026 in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, case number 26-90764. The debtor is a Houston-based personal-injury and mass-tort practice that represents more than 20,000 clients nationwide, and its case opened directly into a fight over the litigation-finance debt that funded its growth: within two days of the filing, secured lender CMG Funding 2025 LLC filed an adversary proceeding disputing the firm's characterization of its own security interest and objected to the firm's request to use cash collateral.

The firm intends to pursue a plan of reorganization built around a restructuring support agreement term sheet signed August 18, 2026 with Sergio P. De La Canal, an individual with extensive prepetition contractual ties to the firm through marketing, payroll, and office-lease arrangements. That overlap between the debtor's proposed restructuring partner and its existing vendor relationships is now central to the objecting lender's case, which frames the credit-agreement dispute as an effort by the debtor and its insiders to reorder secured claims for their own benefit.

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Galindo Law Firm Files Chapter 11 Amid $50M Lien Fight

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Mass Tort Practice and the CMG Litigation-Finance Facilities

GLF began as a single-plaintiff personal-injury and property-damage practice before expanding around 2021 into mass torts, including Zantac, Roundup, and Camp Lejeune litigation. To fund that expansion, the firm turned to litigation-finance credit facilities rather than traditional bank debt. On May 9, 2024, GLF and an affiliated firm, Galindo & Mott, LLP, borrowed $25 million under a senior secured credit agreement with CMG Funding 2024 LLC as lender and administrative agent, Deer Finance, LLC as servicer, and JBSL Legal Finance LLC as participation administrator. Less than a year later, on February 26, 2025, the same borrowers refinanced that facility into a $45 million credit agreement with CMG Funding 2025 LLC, extending additional liquidity secured by the same collateral package.

The 2025 facility functioned as a revolving line tied to a "borrowing base" calculated from the estimated value of GLF's mass-tort case inventory, with the lender holding final approval over that valuation and any adjustments to it. GLF's first-day declaration states that the lender stopped advancing further funds around February 13, 2026 unless GLF accepted new conditions and funding requirements, cutting off the credit line the firm had relied on for case-acquisition costs and general overhead. CMG disputes the debtor's account of the relationship entirely: in its objection to the cash collateral motion, CMG states that at least $50 million is now outstanding under the credit agreement, including interest and fees, and that GLF granted it a blanket lien on substantially all of its property, including attorney-fee receivables from the firm's Zantac and mass-tort dockets.

Cash Collateral Fight and CMG's Adversary Proceeding

GLF's core legal position is that whatever lien CMG holds cannot reach client trust funds or fees that have not yet been earned. The firm's cash collateral motion argues that a lawyer's interest in a contingency-fee contract does not vest until settlement or judgment, so no security interest can attach to unearned fees without constituting improper fee-sharing with a non-lawyer under the Texas Disciplinary Rules of Professional Conduct. GLF also disputes the amount of CMG's claim outright and notes that CMG received approximately $182,000 in payments within the 90 days before the petition date, which the firm says remains subject to avoidance under section 502(d) of the Bankruptcy Code pending repayment. The dispute reaches into the firm's banking structure as well: under a deposit account control agreement between CMG, Deer Finance, and JPMorgan Chase Bank, N.A., 75% of receipts flowing into a designated "DACA" account are automatically diverted to the lender, with the remaining 25% released to GLF's operating account.

CMG rejected that framing outright. In an omnibus statement of facts filed alongside its objection, CMG characterizes the chapter 11 filing as "the culmination of a systematic and ongoing fraudulent scheme" by GLF and De La Canal to evade its secured creditor rights — a characterization CMG has made in litigation papers, not a finding by the court. CMG says it holds a perfected blanket lien over all of GLF's assets, including receivables, perfected through a UCC-1 financing statement filed in Texas the day after the credit agreement was signed, and argues that GLF's proposed adequate protection package — reservation-of-rights replacement liens riddled with carve-outs, with no lien on unencumbered assets and no superpriority claim — amounts to no protection at all. GLF's proposed interim order would have capped cash collateral use at $127,957 through the week ending September 18, 2026 and $594,305 through January 1, 2027, but that order remained proposed rather than entered as of the docket reviewed for this report, with CMG's consent or a further court ruling still required.

The RSA With Sergio De La Canal and Related-Party Ties

The debtor's proposed restructuring path runs through Sergio P. De La Canal, whose affiliated entities are counterparties to the August 18, 2026 RSA term sheet. De La Canal already controls much of GLF's operational infrastructure: Decibel Legal Services, LLC provides marketing, case-tracking, and data-management services to the firm; Damage Resources, LLC serves as GLF's professional employer organization, handling payroll for the firm's roughly 15 staff members; and De La Canal's Alpha Seven LLC is the landlord under GLF's office lease. GLF's first-day declaration also discloses that Decibel holds a judgment against GLF for $10,277,103.10 plus post-judgment interest and has exercised an alleged right to garnish funds owed to the firm.

CMG has pointed to that same web of relationships as evidence supporting its fraud allegation, arguing in its omnibus statement of facts that GLF and De La Canal had discussed adding Decibel as a co-borrower under the credit agreement before the chapter 11 filing. Those are contested characterizations rather than adjudicated findings, and the adversary proceeding CMG filed on August 26, 2026 is the vehicle through which the competing accounts of GLF's secured debt and its relationship with De La Canal will be tested.

Complex-Case Procedures and Client Confidentiality

Because GLF represents more than 20,000 current and former clients nationwide, the firm sought and obtained complex-case treatment and retained Stretto, Inc. as claims, noticing, and solicitation agent, with the retention order entered the same day the case was filed. GLF also asked the court to let it maintain a separate, redacted creditor matrix and claims schedule to protect clients' protected health information and privileged case details — information the firm is otherwise required to disclose under the Bankruptcy Code's schedule and creditor-list provisions — and to authorize email service on clients given the volume of parties in interest. The court granted the firm's related request for extra time to prepare its schedules and statement of financial affairs, extending the deadline to October 7, 2026.

GLF's proposed financial advisor, Harney Partners, represented in a declaration supporting the cash collateral motion that the firm's short-term budget reflects only ordinary operating and case-administration disbursements and does not contemplate using any client funds held in IOLTA accounts. That distinction — between the firm's own attorney-fee receivables, which CMG claims as collateral, and client trust funds, which GLF says are categorically outside the dispute — runs through nearly every first-day filing in the case.

Frequently Asked Questions

Who is the claims agent for Galindo Law Firm?

Stretto, Inc. serves as claims, noticing, and solicitation agent under a retention order entered on the petition date, reflecting the scale of noticing required across the firm's more than 20,000 current and former clients.

Is CMG Funding a secured creditor in the Galindo Law Firm case?

That is disputed and unresolved. CMG asserts a perfected blanket lien on GLF's assets, including attorney-fee receivables, while GLF contests the lien's validity and its reach into unearned fees. CMG's adversary proceeding, filed August 26, 2026, is intended to resolve the question.

Does the bankruptcy affect client trust funds held by Galindo Law Firm?

GLF states that client funds held in its IOLTA accounts are not commingled with operating funds and that its proposed cash-collateral budget does not contemplate using any client trust funds, a position supported by its financial advisor's declaration.

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