Montessori School Operator’s Bankruptcy Loan Gets DOJ Pushback

Montessori schools operator Higher Ground Education Inc.'s proposed $8 million Chapter 11 financing package prompted opposition from the Justice Department’s bankruptcy watchdog.

US Trustee Lisa L. Lambert objected to Higher Ground’s proposal to roll up $2 million of existing debt to a higher tier of payment priority in a Wednesday objection filed in the US Bankruptcy Court for the Northern District of Texas. The US Trustee also challenged liens on avoidance actions and waivers of certain creditor rights.

The company’s financing package amounts to about $8 million, including the $2 million that would be converted from pre-bankruptcy debts into post-bankruptcy debt.

Higher Ground filed for Chapter 11 in June, saying it needed to reorganize in bankruptcy after an expansion left it with unsustainable lease obligations, more secured debt, and persistent operating losses. It was forced to foreclose and sell many of its assets, including intellectual property and schools, after it defaulted on a secured loan payment earlier this year.

The bankruptcy financing is comprised of a $5.5 million senior facility from YYYYY LLC, which includes a $500,000 roll-up of pre-bankruptcy debt.

Additionally, the company proposed a $2.5 million junior facility from Guidepost Global Education, Inc., including a $1.5 million roll-up.

Lambert said in the objection that the roll-up provisions “inappropriately” improve the priority of junior creditors and grants them a superpriority claim on causes of action aimed at recovering certain pre-bankruptcy payments.

The US Trustee objected to the company’s proposal to grant liens on proceeds from potential avoidance actions, which are typically reserved for unsecured creditors, and the waiver of rights to surcharge collateral under federal bankruptcy law.

Higher Ground’s proposal also only offers recovery to general unsecured creditors if their voting class accepts the plan, making their potential recovery from avoidance actions “tenuous,” Lambert said.

The US Trustee said the plan “improperly” restrains some creditors from invoking the equitable doctrine of marshaling, which proscribes one creditor with multiple sources of collateral from defeating the claim of another creditor with only one source of collateral to satisfy their debt.

Higher Ground didn’t immediately respond to a request for comment.

Foley & Lardner LLP represents the company.

The case is Higher Ground Educ., Inc., Bankr. N.D. Tex., 8:25-bk-80121, 7/16/25.