Monday, August 5, 2013

Adair County Hospital District files Chapter 9 bankruptcy

In a move perhaps unprecedented in Kentucky, the Adair County Hospital District has voted to file for protection under Chapter 9 of the federal bankruptcy code, the same chapter used by bankrupt cities such as Detroit.

The district has a $20 million debt, creditors demanding payment, and no clear way to pay them. "The Chapter 9 filing will allow the hospital district to reorganize by extending the timeline to repay debt, refinance debt, or reduce debt by different means. It does not liquidate the taxing district nor does it close down operations" of Westlake Regional Hospital in Columbia, reports Sharon Burton of the Adair County Community Voice.

David Cantor, an attorney with Seiller Waterman LLC in Louisville, told Burton the filing is “incredibly rare” and perhaps the first in the state. “We cannot find any published cases of a Chapter 9 in the Commonwealth of Kentucky,” he said.

Farmers National Bank of Danville has sued in state court, seeking to force the  district board to levy a local property tax to pay its debt. "The federal court will, however, now likely decide the local taxation issue," Burton reports. "The hospital board voted to establish a tax but it is stalled until at least the 2014 general election after a group of citizens successfully filed a recall petition."

Only part of the Community Voice story is online, but a 7 MB PDF of its three pages with hospital news can be downloaded here.

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