When businesses get stuck in debt that they cannot repay, the repercussions can be devastating to a whole community. The purpose behind Chapter 11 bankruptcy protection is not just to protect the business owners but it also helps to protect the entire community.
Owners of small businesses around Sound Shore Medical Center in New Rochelle recently spoke to reporters about their concerns about the hospital's bankruptcy protection plan. For decades, the hospital has served as a hub for the city's downtown area. Restaurants and other small businesses depend on the patients, workers, visitors and suppliers going into the hospital to become their own customers. About 1,200 people work for the hospital, which could make many of them repeat customers to these businesses.
Sound Shore filed for bankruptcy protection some time ago and originally considered merging with North Shore-Long Island Jewish Health System. That plan later fell through. Sound Shore is now preparing to exit bankruptcy protection with a plan that will include selling the hospital to Montefiore Medical Center in the Bronx.
Along with Sound Shore, Montefiore will also purchase Mount Vernon Hospital and Schaffer Extended Care Center. Local business owners expressed their hopes that the new arrangement will keep the hospital running for many years to come.
Chapter 11 is a type of bankruptcy that allows a business to eliminate some debt and delay paying off other debts while it formulates a plan to return to profitability. Chapter 11 is commonly used by large corporations, but is often used by smaller companies as well.
Unlike other forms of business bankruptcy, Chapter 11 does not necessarily require liquidating all the company's assets and closing up shop. Instead, Chapter 11 can allow a company time to reorganize itself in a way that will make it stronger in the future.
Long Island business owners and managers who see their companies getting mired in debt may want to consider Chapter 11 as a way to get the business back on track. It can be a powerful tool to restore financial health not just to themselves and the company, but to an entire community touched by that business.
Source: Lohud.com, "As Sound Shore Medical Center faces merger and bankruptcy, fear pervades," Jane Lerner, June 2, 2013