Given the current state of the economy, it’s not uncommon for debtors to file for bankruptcy protection these days. Significant reductions in steady income have caused otherwise well-off consumers and businesses to tap into their savings. In Georgia, many debtors are even on the verge of having their home or business foreclosed upon. One particular GA business has struggled with debt to the point that it filed for bankruptcy not once, but twice.
According to court documents, Henry Anesthesia Associates filed for Chapter 11 reorganization bankruptcy July 28 for the second time after canceling its original petition last year. The Stockbridge-based practice first filed for bankruptcy protection in September 2019, but the case was dismissed in June at the company’s behest so it could qualify for a Paycheck Protection Program loan.
The Paycheck Protection Program
Paycheck Protection Program (PPP) loans were issued by the U.S. Small Business Administration in accordance with the CARES Act up until August 8 to businesses with fewer than 500 employees in response to the coronavirus outbreak. The loan allowed small businesses facing financial hardship to continue operating and keep employees on payroll. However, businesses that filed for bankruptcy protection were not eligible.
Henry Anesthesia Associates applied for a PPP loan after suffering substantial income loss in March when its clients stopped performing elective procedures due to the pandemic. Yet, despite offering critical medical services to four hospitals in the Atlanta-area, the anesthesiology provider was consequently denied PPP relief due to the bankruptcy caveat.
In order to qualify for the PPP loan and continue paying its staff, Henry Anesthesia Associates decided to withdraw its Chapter 11 petition. Unfortunately, even with the additional financial aid, the company remained in arrears, owing upwards of $3.9 million to creditors (including the IRS). Unable to keep up with payroll costs and surmounting debt, Henry Anesthesia Associates had no choice but to refile for bankruptcy protection in Georgia.
What Happens When You Cancel a Bankruptcy Petition?
Although Henry Anesthesia Associates decided to cancel their initial bankruptcy petition, the filing was still recorded and cannot be expunged. The same applies to consumers who file.
Even if a debtor suddenly amasses a large sum of money to pay off creditors, once the petition for bankruptcy is filed, it will remain on the individual or business’ credit report whether the bankruptcy is seen through to the end or not.
Furthermore, it is up to the court to grant the petitioner’s request for dismissal. Debtors filing for Chapter 11 or 13 may request a voluntary dismissal, but Chapter 7 applicants who change their minds must file a motion to dismiss, which is much more complicated and should not be attempted without the aid of a bankruptcy lawyer.
For these reasons, anyone considering bankruptcy should seek legal counsel prior to making a decision on their own.