Past Example of Bankruptcy Gone Wrong in Miami

1156821_handcuffs.jpgCoral Gables dentist Dr. Rene Piedra likely left patients he was accused of overcharging for dental work high and dry by filing for Chapter 11 bankruptcy. Several of Piedra’s patients are claimed he allowed them to open a line of credit through his practice but then over charged them by thousands of dollars for dental work and then refusing to issue refunds. Piedra claimed he intends to issue refunds, but merely needs time to figure out which patients are owed and how much. Instead of answering questions from local new networks about how long it will take him to figure it out, he deferred to his bankruptcy lawyer. His lawyer states that the patients who are owed money will be repaid during the restructuring process. With his recent filing of Chapter 11 bankruptcy protection, the chance that those patients will receive a full refund is unlikely. It is far more likely that Piedra managed to avoid giving full refunds by filing for Chapter 11. Is it really so easy for a company to scam people they are supposed to help and then just file for bankruptcy and avoid paying? Most people use bankruptcy as a way to get out of a financial crisis, but there are always people who will try to take advantage of the situation. Wondering how that is possible?

Chapter 11 bankruptcy is a restructuring bankruptcy, not a liquidation bankruptcy. In liquidation, a business’s assets would be sold and the profits used to pay of creditors. If the dentist does not have a large amount of debt, the patients may have gotten all their money back.. However, in restructuring bankruptcy the business will stay open and pay off some of the debt over a longer period of time and some of the debt will be discharged. The payment plans in Chapter 11 can be as long as five years, which means his patients will likely not get back all of their money and have to wait years. Fortunately, a court has to approve the filing. If Piedra is not overwhelmed with debt and does have the money to issue full refunds, the courts can reject his appeal and he could be forced to pay the amounts back in full. Depending on the business classification of his practice, Piedra could avoid having to sell his expensive car to repay his patients.

Luckily, there are several safe guards within the Chapter 11 bankruptcy process to keep businesses and individuals from taking advantage of the process. During the Chapter 11 process, businesses are forced to restructure they way they run to become more profitable. They may be forced to sell off unprofitable parts of the company and large companies might be forced to close unsuccessful branches or stop providing services that have a low profit margin. Besides the restructuring process, creditors do not have to agree to Chapter 11, and the courts can also reject the proposal. So, there are a few different ways to keep businesses from scamming people and then avoiding payment.

Links:

Dentist In Local 10 Investigation Files For Bankruptcy, June 30th 2008