Bankruptcy court approves motions for Connecticut nursing homes
A Chapter 11 bankruptcy is typically used by businesses that are interested in reorganizing during difficult financial times so the business can continue to operate while it pays off creditors over a period of time.
June 22, 2013
Bankruptcy court approves motions for Connecticut nursing homesArticle provided by Law Offices of Ellery E. Plotkin, LLC
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There are times when businesses, both large and small, run into such financial difficulties that they need to consider making changes and reorganizing under a Chapter 11 bankruptcy. That was the case for a group of five Connecticut-based nursing homes that recently filed petitions for reorganization under Chapter 11 in order to create more durable and competitive cost structures.
The nursing homes' bankruptcy filing sought to gain relief from unmanageable costs related to medical benefits and union pensions, as well as other provisions that were included in certain union labor agreements that restricted the flexibility of the homes. Two motions -- one that requested approval for financing, and the other that sought an extension of various interim collective bargaining agreement modifications -- were filed and ultimately approved in an effort to make certain that the nursing homes would be in a position to continue functioning as a business and serving their elderly clientele.
Chapter 11 Bankruptcy
A Chapter 11 bankruptcy is typically used by businesses that are interested in reorganizing during difficult financial times so the business can continue to operate while it pays off creditors over a period of time. In this type of bankruptcy, the business is usually permitted to act as a "debtor in possession," meaning it retains possession and control of its assets during the reorganization.
The U.S. Bankruptcy Code and Federal Rules of Bankruptcy Procedure establish some of the rights and duties that a debtor in possession has, including:
-Filing informational reports, such as monthly operating reports
-Hiring accountants, lawyers and other professionals to help during the bankruptcy case
-Filing tax returns and other necessary reports after the reorganization plan is confirmed
Chapter 11 for small businesses
Small business owners should be aware that their Chapter 11 filings receive somewhat different treatment than a typical bankruptcy case. According to the Bankruptcy Code, a small business case is one involving a "small business debtor." In turn, a small business debtor is one engaged in commercial or business activities, other than some relating to real estate, "with total non-contingent liquidated secured and unsecured debts of $2,343,300 or less," who also meets other requirements regarding the bankruptcy creditors' committee.
A small business debtor is required to make ongoing court filings that show, among other things, the business's profitability and compliance with bankruptcy rules and tax laws during the bankruptcy case. Small business cases also tend to move through the bankruptcy process more quickly, despite these filing requirements.
Due to the complex nature of Chapter 11 bankruptcy, it is highly advisable that businesses that are struggling financially seek the assistance of a skilled bankruptcy attorney. A bankruptcy lawyer will be able to help the business properly negotiate and work with creditors to keep the business running.