DOWNEY Regional Medical Center (DRMC) announced last week that it filed for Chapter 11 bankruptcy on September 14, 2009. The hospital said that bankruptcy was in the best long-term interests of the hospital, the community, it’s employees, physicians, patients, vendors, and other stakeholders. But wait. Isn’t bankruptcy the end of life for a business or an individual? On the contrary, bankruptcy reorganization ensures that a business or individual survives as a financially viable entity in the future by allowing it to get rid of unwanted debt, unprofitable contracts, lawsuits and other legal claims while allowing the business or individual to continue operating and keeping assets that it needs to reorganize. Thus, GM and Chrysler are still doing business now after declaring bankruptcy earlier this year.
Even K-mart and Orange County have gone through bankruptcy in the past to assure their profitability and survival today. Yes, even the companies of Donald Trump have gone through several bankruptcies as recently as 2004. When push comes to shove, bankruptcy is the best alternative that a business or individual can rely on to ensure it’s financial survival and profitability. That’s why even hospitals like DRMC resort to bankruptcy to become profitable again. To ensure that a patient with clogged arteries survives, physicians must perform a coronary bypass. Otherwise doing nothing and continuing to live as if nothing was wrong would hasten the death of the patient. Hence, DRMC knows that it must get bankruptcy relief now if it wants to survive in the future.
Unbeknownst to DRMC until two years ago, it has been losing money at the rate of $1.0 million a month for the last ten years. Its cash reserves has lost $100 million in the last decade prompting new management to hit the panic button two years ago. The culprits are HM0 contracts that are unprofitable for DRMC, and outdated financial systems. Insurance companies have gotten the better of DRMC by pinning down the cost of insurance reimbursements for medical procedures done at the hospital. In addition, groups of physicians have sued the hospital to get paid for their fees for services performed that have not been paid. DRMC started in 1920 with 6 beds and 2 physicians. It now has more than 500 beds and serves Downey and surrounding communities. DRMC has serious liquidity problems due to continuing losses and ran out of cash reserves last year. Filing for bankruptcy allows the hospital to access new lending markets that have committed to providing it with much needed cash during the bankruptcy which the hospital expects to last a year. Without the unprofitable HMO contracts and with new financial systems in place, the hospital expects to emerge out of bankruptcy next year without any liquidity problems and with sufficient cash generating potential to ensure a successful future for the hospital.
If you have too much debt and mortgage contracts that have now caused you to be unprofitable as an individual, you might consider getting rid of the debts and contracts with a bankruptcy. For instance, if you owe $30,000 of credit card debt requiring $1,000 of monthly minimum payments, own 2 houses that each have 2 trust deeds on them requiring you to pay combined mortgages that eat up all of your net household income, you certainly have no disposable income that you can save. If you qualify for a chapter 7 bankruptcy, you can wipe out the entire $30,000 of credit card debt, choose to keep either or both houses, while keeping most if not all of your other assets, and keeping all of your income. Just like DRMC, GM, Chrysler, K-Mart, and Orange County, you can become a productive citizen again. If you decide to abandon one house, you will owe nothing on the first, second trust deeds, or home equity line on the house that you abandon. Indeed, you will owe nothing on it.
If you need debt relief, contact my office. I will analyze your case personally.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published on September 23, 2009 in Asian Journal Los Angeles p. B3 )
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