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Verity Health Systems Files California Bankruptcy

Verity Health Systems Files California Bankruptcy

Verity Health Systems, a nonprofit healthcare system which operates four San Francisco Bay Area hospitals, filed for bankruptcy protection last week, as it explores strategic options to eliminate burdensome debt. The organization has been weighing the possibility of selling its Santa Clara County hospitals to relieve the financial pressure of $500 million in long-term debt, combined with aging facilities that need some $66 million in improvements. The organization filed for Chapter 11 bankruptcy with the US Bankruptcy Court in the Central District of California to keep all six of its hospitals operating while it organizes an orderly and efficient sale of its assets.

Verity Health Systems Bankruptcy

The bankruptcy filing included no less than seventeen separate medical facilities. The CEO of Verity Heath, Rich Adcock, states that the company decided to declare Chapter 11 bankruptcy, "after a diligent process of assessing all possible options alongside our financial and legal advisors, Verity Health has made the best strategic decision for all of our patients, employees and other stakeholders." The company has secured a $185 million loan in order to continue operating throughout the bankruptcy process.

Employee Union Challenges Bankruptcy

Not everyone involved with Verity Health Systems believes that the California bankruptcy is for the best, however. The union of healthcare workers that make up roughly 2,000 of Verity Health Hospital workers, the SEIU-UHW, is challenging the bankruptcy. The SEIU-UHW is challenging the bankruptcy in an effort to ensure that the communities served by the hospitals continue to receive access to care. Additionally, the California union wants to ensure that its hospitals stay open and continue to meet employee pension obligations. The challenge signifies that Verity will have a tough time attempting to nullify any collective bargaining agreements.

Hunt for Buyers Continues

It's no secret that Verity Health has been searching for buyers for some time, and will continue to find a suitable offer that it can accept. Struggling businesses often use California Chapter 11 bankruptcy in order to sell all or a great number of their assets. Chapter 11 can offer many unique advantages for both the buyer of a business, as well as, the seller.

Global Brokerage's Chapter 11 Bankruptcy Plan Challenged

Global Brokerage's Chapter 11 Bankruptcy Plan Challenged

The US Trustee assigned to the Chapter 11 Bankruptcy protection case for Global Brokerage Inc. raised concerns this week about the exchange broker's bankruptcy reorganization plan. Global Brokerage Inc., is a holding company with indirect effective ownership of Forex Capital Markets (FXCM), which is a retail foreign exchange broker. The company filed a voluntary petition for reorganization under Chapter 11 of the bankruptcy code in the U.S. Bankruptcy Court for the Southern District of New York in early December 2017. The company believed that the bankruptcy case would take sixty days or less, but is now encountering roadblocks from the US Bankruptcy Trustee.

Trustee Objections to Reorganization Plan

The US Trustee assigned to Global Brokerage's bankruptcy case argues that certain broad releases set to be granted to FXCM Group and Leucadia, in addition to, CEO compensation violates the fair and equitable test set forth by the U.S. Bankruptcy Code. Under the "fair and equitable" test, secured creditors must be paid at least the value of their collateral and the debtor's owner may not retain anything on account of their equity interest until all obligations are paid in full. In order to obtain approval or "confirmation" of a chapter 11 plan, the bankruptcy court requires that the plan also be feasible, in good faith, and in the best interest of the creditors.

Issues with Debtor Release

US Bankruptcy Trustee William K. Harington submitted his objection to the confirmation of Global Brokerage's Chapter 11 plan because its "released parties" was too far-reaching and to encompassing from claims, obligations, damages, and liabilities, among others. Harrington mentioned in a press release relating to the case that "in applying heightened scrutiny and some skepticism, the Court will find that the Debtor Releases, as currently drafted, are overbroad." This would present a problem should securities litigation or other litigation arises against Global Brokerages' non-debtor affiliates, successful plaintiffs may not be able to "pierce the corporate veil", or transfer liabilities to its shareholders. It is not a large surprised then that shareholders unanimously voted to approve the reorganization under Chapter 11 protection.

CEO Bonus Violates Bankruptcy Code

An additional objection to the Global Brokerage Chapter 11 plan was the completion bonus of $1 million payable to the company CEO, Kenneth Grossman. The bankruptcy trustee also cited the section 503(c) of the Bankruptcy Code which was enacted to "eradicate the notion that executives were entitled to bonuses simply for staying with the Company through the bankruptcy process. With confirmation hearings set for this week, it's a possibility that Global Brokerage will have to go back to the drawing board with its reorganization plan to come up with a plan that satisfies creditors and the bankruptcy trustee in order to have it confirmed.

Gymboree to Exit Chapter 11 Bankruptcy

Gymboree to Exit Chapter 11 Bankruptcy

The San Francisco, California based children’s apparel store, Gymboree, was approved to exit Chapter 11 bankruptcy on September 7th, 2017. The company plans to cut $1 billion worth of debt and joins the list of retailers such as Payless Shoes that have been able to successfully reorganize company debt using Chapter 11 bankruptcy protection.

In its bankruptcy filings, Gymboree claimed that they had fallen victim to shifts in consumer behavior that have led to more online shopping and less traffic in shopping malls throughout the country. Gymboree will continue its business operations while shedding nearly 330 underperforming stores in order to convert some $900 million of debt into equity. The new president and CEO of Gymboree, Daniel Griesemer, said in a statement “while there is still work ahead to complete the process, we are excited about the future opportunities for Gymboree as we continue to transform the business”. The company experienced a fairly straight forward Chapter 11 bankruptcy with only one objection filed by the Department of Revenue in August that caused the bankruptcy plan that Gymboree entered into bankruptcy with to be altered slightly.

The company’s post-bankruptcy strategy is to place capital previously allotted towards interest payments and fixed obligations towards updating merchandising and investing in store remodels. By lowering the company’s brick and mortar footprint through the store closings, they hope to be able to clean up their long-term balance sheet and focus instead on their more profitable lines.

Because of the newness surrounding the recent retailer Chapter 11 bankruptcy exits of Payless and Gymboree, it is hard to say whether the new financial game plans will equate to steady profitability. In the same week that Gymboree is exiting bankruptcy, Vitamin World, a chain retail store with shops across America is reported planning to enter into Chapter 11.

Business Mistakes Can be Forgiven with Reorganization or Liquidation

One of the great things about the Sacramento area is that there are rich opportunities for small businesses to thrive and flourish from Carmichael to El Dorado Hills. There are restaurants owned locally on every street. There are offices for every type of professional service, from dentists to certified public accountants. While these small businesses are a valuable part of our community, that doesn’t necessarily mean it is easy to be a small business owner.

Any number of issues can arise for a small business, including all kinds of tax liability, tort liability for a personal injury, liability for disabled access issues, and more. Not to mention business can simply be down or fluctuate greatly over periods of time. In these situations it may be a good idea to explore the possibility of filing for bankruptcy protection.

Bankruptcy can be the solution that allows a small business owner to reorganize debts to save the business, liquidate the company, or wipe out personal liability for business debts. Depending on the owner’s particular goals, it might be a good idea to file a business bankruptcy, a personal bankruptcy, or both.

A Chapter 11 bankruptcy is the one most people have heard of on the news. It is typically known as a business reorganization bankruptcy. This type of bankruptcy is typically used by businesses who want to continue operating while in the bankruptcy. This type of bankruptcy can be more expensive and complicated when compared to other types of bankruptcy. But, if the business has less than a certain amount of debt, it can be classified as a small business, which usually can proceed more quickly because there are fewer procedural hurdles over which to jump.

A business Chapter 13 doesn’t really exist in the same way as a Chapter 11 or Chapter 7. However, in a sole proprietorship, the debtor and her business are considered the same entity. In that case, business debts are considered part of the bankruptcy. A Chapter 13 then is designed to allow the debtor to keep all personal property and reorganize debts through a three to five year repayment plan. This could be a great option for sole proprietors who have substantial assets and want to continue operating.

A business Chapter 7 is good for a partnership, corporation, or LLC that is looking to close down, or liquidate, a business. In these cases, the business does not receive a discharge. When a business Chapter 7 is filed, the bankruptcy trustee sells the assets of the business and uses the proceeds to pay creditors. This can be a very attractive option for small business owners who desire to close the business without the hassle of negotiating the disbursement of assets to creditors.

A personal Chapter 7 for a sole proprietor can help close the business and get rid of debts. Or, in the alternative and in the right circumstances, the bankruptcy can get rid of debt and allow the debtor to continue the business free of debt.

Most business owners are not wildly successful on their first try. Often, it takes some rough experiences to figure out the way to succeed. Bankruptcy can offer a way to acknowledge that this particular business isn’t working the way it was supposed to and allows the debtor to make a professional pivot to succeed on the next attempt. Bankruptcy in El Dorado Hills or nearby areas is available for those who need help with their business debts.

How Much Does Bankruptcy Cost: A Look At Attorney Fees

In most bankruptcy cases, the fees an attorney charges are disclosed. In fact, the Court also provides guidelines covering the range of legal fees applicable to work on consumer bankruptcy cases. In chapter 11, an attorney is paid after filing a motion for compensation which lays out exactly how much the attorney is charging and how much time was spent on particular tasks.

However, it seems that in chapter 9 (municipal bankruptcies) fees do not have to be disclosed. This means that the attorneys for Detroit could charge millions in legal fees without ever disclosing to the court or to creditors how much they are charging or what they are spending their time on. The bankruptcy judge in this case decided to take a closer look at the cost of the case, and so the judge intends to appoint an examiner to make sure that the attorneys' fees are "disclosed and reasonable." Among other things, the examiner will probably review the attorneys' fees and inform the court if they fees are out of the scope of permissible legal work. While the parties could object to the appointment of an examiner, it seems unlikely at this time.

Fortunately for most individuals considering bankruptcy, most bankruptcies are handled on a flat fee basis. This means that the price is agreed upon before the bankruptcy is filed, so that a debtor knows exactly how much he or she will be paying for a bankruptcy filing and doesn't have to worry about the hourly rate of an attorney.

Source: Tom Hals, Yahoo! News," Lawyers in Detroit bankruptcy may face scrutiny on fees," August 1, 2013

Automatic Stay Prevents Lawsuits Against Detroit

Last Wednesday, the bankruptcy judge overseeing the Detroit bankruptcy case put a hold on all lawsuits that were challenging Detroit's bankruptcy filing, as well as most other litigation against Detroit. However, this does not mean an end to Detroit's legal troubles. The bankruptcy judge pointed out that his ruling did not decide whether Detroit could modify its pension benefits in bankruptcy, or even whether Detroit was eligible for bankruptcy protection.

Further, litigants can still try to seek relief from stay, allowing them to continue their lawsuits outside of bankruptcy court. Additionally, just because state and federal court litigation was put on hold doesn't mean litigation can't occur in the bankruptcy court itself. In fact, this is what the bankruptcy judge wants to occur. The judge believes that having the issue of Detroit's eligibility for bankruptcy litigated in one forum will save Detroit both time and money, which will give Detroit a better chance at a successful reorganization.

As the Detroit bankruptcy case shows, the automatic stay is a very powerful thing. Fortunately for debtors, the automatic stay is not limited to municipal bankruptcies. If an individual files for bankruptcy, he or she will also benefit from the automatic stay. This means that all lawsuits against him or her, as well as foreclosures and other collection actions, will be put on hold.

Source: Robert Snell and Chad Livengood, The Detroit News, "Judge rules he has sole jurisdiction in Detroit bankruptcy, freezes suits against city, Snyder, EM," July 24, 2013.