It is not unheard of in Pennsylvania and elsewhere for hospitals and other medical providers to seek debt relief by filing a bankruptcy petition. There are several circumstances that can converge to make it a smart move for a medical provider or other corporate entity. Seeking bankruptcy protection may be a necessary tactic to restructure debt or obtain a breathing spell to hold off creditors while another financing vehicle is created. In one recent case, a large medical center declared bankruptcy to stop pressure by creditors while it puts together a sale to a private corporation under an existing contract of sale.
Chapter 11 rehabilitation for restaurants and fast food operations is no stranger to Pennsylvania bankruptcy attorneys. As with any other business, a restaurant or small chain of eateries may encounter cash flow problems and get behind on debt obligations. That problem may be partly caused by the state of the economy, and sometimes is also caused by overzealous growth that needs to be controlled. In Chapter 11, while the company's owners take steps to re-structure debt and attract investment mechanisms, the restaurants themselves may stay open and continue to generate revenue to strengthen the company's emergence from bankruptcy.
A small business in Pennsylvania can file a Chapter 7 bankruptcy if it intends to cease doing business and owes unmanageable debt. If the company closes its doors, a Chapter 7 Trustee will take over any unencumbered assets and will likely hold a public auction to sell the property. In the meantime, as soon as the case is filed in the federal bankruptcy court, an automatic stay is issued to protect the business from further collection activities as it winds down its affairs.
Small businesses can file for a Chapter 11 or a Chapter 7 bankruptcy in Pennsylvania and all other federal bankruptcy districts. Chapter 11 is a reorganization plan that a business will file to reorganize its debts and business affairs, and hopefully continue to do business, even after the bankruptcy is ended. The business in a Chapter 11 ultimately wants to be discharged from the bankruptcy with a new lease on life and with the authority to continue doing business.