Government shutdown hits Promise Healthcare case, wider bankruptcy business

January 4, 2019 – The partial US government shutdown is hitting bankruptcy proceedings in the country as the Department of Justice filed a motion on January 2 for a stay of the Chapter 11 proceedings of hospital operator Promise Healthcare Group because funding for Justice Department attorneys had expired.

 

The Justice Department told a Delaware bankruptcy judge that the US has numerous interests in the Promise Healthcare Group case, including interests that could be impacted by the pending motions for the sale of the debtors’ assets. Promise Healthcare Group and 45 affiliated Debtors filed for Chapter 11 protection with the US Bankruptcy Court in the District of Delaware, lead case number 18-12491, on November 5, 2018.

 

“At the end of the day on December 21, 2018, the appropriations act that had been funding the Department of Justice expired and appropriations to the Department lapsed… Undersigned counsel for the Department of Justice therefore requests a stay of the above-captioned bankruptcy cases until Congress has restored appropriations to the Department,” the motion states, adding that the Justice Department does not know when funding will be restored by Congress.

 

The motion also warned that the same is true for several other “Executive agencies”, implying that other bankruptcy cases could be affected. A hearing on the emergency motion is to be held on January 4. 

 

Meanwhile, the Wall Street Journal reported that the shutdown is delaying payments from collapsed companies to former workers and other creditors who weren’t paid during a business’s final days of operation because the Justice Department needs to give approval for any payouts by the country’s bankruptcy trustees, who are in charge of sending out payments after a business files for chapter 7 protection.

 

According to the Justice Department data cited by the WSJ, Trustees made more than $2bn worth of payments in 2016 to creditors of more than 43,000 bankruptcy cases. A total of 13,682 businesses filed for chapter 7 protection during the 12-month period ending on September 30, the latest statistics available from the Administrative Office of the US Courts.