At one time or another, many Pennsylvania businesses will suffer as a result of the changing economy. While many of these organizations will be able to quickly recover, some will not. For those unable to recover, decisions will need to be made. The company can either go out of business or can possible file for bankruptcy and attempt to restructure into a more profitable entity. When the second option is chosen, Chapter 11 bankruptcy may be the best option.
Chapter 11 bankruptcy allows the company to continue operating. However, during the bankruptcy process, creditors are put on hold in anticipation of the company restructuring. During this process, the company submits plans to restructure its debt so that it can once again become a profitable entity.
North Philadelphia Health System has recently filed for Chapter 11 bankruptcy protection. Reports indicate that it currently owes almost $25 million in unsecured debt. Additionally, it owes almost $2 million in secured debt. The health system determined that it would be unable to make its $400,000 payment on its mortgage. In an attempt to prevent foreclosure proceedings, the company decided that bankruptcy reorganization would be in its best interest.
With Chapter 11 bankruptcy, the Pennsylvania company provides its plan to restructure its debt. Within this plan, secured debts are addressed first; debt owed for taxes generally receive primary consideration. Next, employee wages and interest owed to stockholders are addressed. Other secured debts are next on the list, and finally unsecured debts are considered. Companies who find themselves in financial turmoil may find it beneficial to discuss the benefits of Chapter 11 bankruptcy with experienced legal counsel.
Source: philly.com, "North Philadelphia Health System enters bankruptcy", Harold Brubaker, Jan. 4, 2017