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Texas clinic converts to Chapter 7 bankruptcy

There are different types of bankruptcies available to individuals, as well as, businesses. Each type of bankruptcy has its own advantages and disadvantages. The type of bankruptcy one should choose depends upon each individual situation, since each type has different consequences and benefits. Sometimes individuals or businesses begin a certain type of bankruptcy, but then decide to try to change to another type of bankruptcy. Such is the case with Sadler Clinic in Texas, which has just changed its Chapter 11 bankruptcy to a Chapter 7.

The clinic had initially petitioned for a Chapter 11 bankruptcy. This type of bankruptcy is designed to reorganize a company's debts. The clinic decided to convert to a Chapter 7 when HCA Physician Services requested the clinic to do so. This company is an affiliate of Hospital Corporation of America.

In February, HCA paid $21.3 million for most of the clinic's assets. The clinic's financial troubles began when HCA allegedly broke an affiliation agreement in which HCA agreed to pay $8.9 million to the clinic. After advancing $3.4 million to the clinic, HCA refused to pay the rest of the funds. HCA also refused to assist in restructuring the clinic.

Under a Chapter 7 filing, a business is not able to continue operating. It must also liquidate all of its non-exempt assets in order to help repay creditors. However, there are also advantages to choosing this type of bankruptcy in Texas and elsewhere. This type of filing allows the petitioner to discharge all unsecured debts, such as credit cards. On the other hand, one should be careful to avoid mistakes when filling out the related paperwork, and seeking professional advice may help in achieving the desired goals and finally conquering debt which has become too much too handle.

Source: Becker's Hospital Review, "Sadler Clinic in Texas Moves to Chapter 7 Bankruptcy," Bob Herman, Aug. 13, 2012

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