Business Bankruptcy

In late February 2012, bankrupt Peninsula Hospital in Queens, N.Y., closed down much of its 173-bed facility after NY state health officials ordered it to shut its lab, citing patient safety danger.  Since lab services were intertwined with the hospital’s operations, Peninsula Hospital transferred and discharged its inpatients and cancelled surgeries, according to Crain’s New York.  The hospital could not admit patients, but a spokesperson stated it was not closed. Non-clinical services, like radiology was open, for instance.

The New York state health department listed 59 problems in the lab, many of which related to the hospital’s blood bank. For example, an individual with only two days of training worked alone in the blood bank, according to Queens Chronicle. Blood platelets were stored at improper temperatures and the hospital did not maintain, calibrate and monitor crucial instruments, according to WNYC. State health inspectors discovered three units of expired plasma in its blood-bank freezer, according to Crain’s New York.

Chapter 11 of the Bankruptcy Code generally referred to as “reorganization” bankruptcy usually involves a corporation or partnership.  A chapter 11 debtor in Walnut Creek, Sacramento, San Francisco, Fairfield proposes a reorganization plan to keep a business going and pay creditors over time.

The situation illustrated how bankruptcy can happen to anyone and any entity, even well-known hospitals.  In New York, chapter 11 is usually used to reorganize a business such as a hospital.

Individuals, such as those who own apartments in New York or small businesses, may seek relief in chapter 11 also.  Individuals who file chapter 11 must take a credit counseling course from an approved credit counseling agency, except when a US trustee determines there is an emergency event or there are not enough approved agencies to provide the counseling.

A chapter 11 case in New York starts with the filing of a petition with the bankruptcy court serving the area where the debtor resides. An individual usually resides in the location where the person expects to return to.  For example, a college student filing bankruptcy may live in another state during the school year, but expects to return to the state where his/her parents live so he/she resides in the state where his/her parents live, not where he/she is attending college.  For a business, a company may reside where its headquarters is located.  Where a person resides affects the bankruptcy court where a debtor files bankruptcy.

Some debtors may use residency to choose a court where there are fewer delays so the debtor can get an early discharge on debt or approval of a reorganization plan.  Some courts may have delays because of judge vacancies.  Vacancies create anxiety on court procedures and the number of cases on calendars.  The bankruptcy courts usually posts its calendars on the Internet so people can prepare ahead of time what to expect when they go to a court hearing.  A debtor can find out the line number and order in which a case will be called.  The US trustee office may be in the same or close by building as the bankruptcy court.

When filing bankruptcy, consider a law firm with offices in a court’s vicinity to understand the politics of the judges, trustees, and other parties.