The health system, part of the Jack County (Texas) Hospital District, first entered Chapter 9 bankruptcy — a bankruptcy proceeding that offers distressed municipalities protection from creditors while a repayment plan is negotiated — in February. The bankruptcy court dismissed the case May 26 at the request of the health system.
The health system originally entered bankruptcy as a result of an arbitration award in favor of Blue Cross Blue Shield of Texas. It owes the insurer $29.3 million. After the bankruptcy case was initiated, the health system faced increased operational strain tied to the COVID-19 pandemic, according to court documents filed May 21.
The health system asked the court to dismiss the bankruptcy case to allow it to apply for a Paycheck Protection Program loan through a Small Business Association lender. Small businesses with less than 500 employees are eligible for the loans, but organizations in bankruptcy are not eligible to apply. Faith Community Health System, which has about 250 employees, said it risked losing more than $2.1 million if it remained in bankruptcy.
A Texas bankruptcy court granted the health system’s motion to dismiss May 26 to allow it to apply for the loan. On June 11, Faith Community Health System reentered Chapter 9 bankruptcy.
The health system entered bankruptcy with assets of $10 million to $50 million and liabilities within the same range, according to bankruptcy court documents. Blue Cross Blue Shield of Texas is the health system’s largest unsecured creditor. Its second-largest unsecured debt is a $23.9 million bank note owed to Regional Capital Advantage, according to bankruptcy documents.
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