Foundation Healthcare Bankruptcy Objections Filed


The U.S. Trustee assigned to the Foundation Healthcare case and Healthcare Affiliates filed with the U.S. Bankruptcy Court separate objections to the Company’s First Amended Joint Chapter 11 Plan of Liquidation.

The Trustee asserts, “The release and exculpation provisions included in the Amended Plan should be modified to clarify that they comply with 11 U.S.C. section 524(e), which was never intended to protect non-debtor parties from ‘any negligent conduct that occurred during the course of the bankruptcy.’…In particular, any provisions releasing, exculpating, or otherwise indemnifying Debtors’ board members should be struck from the Amended Plan. The Amended Plan includes insiders Richard Zahn, Steven List, and Lorin Patterson as Released Parties….The Amended Plan includes injunctive language which permanently enjoins pre-petition creditors from pursuing claims against Debtors or Released Parties outside the confirmed Plan.”

In addition, “Under the Amended Plan, the Plan Administrator would distribute any remaining funds to a non-denominational charity. The United States Trustee recognizes that Debtors will be extinguished upon completion of the Amended Plan. However, charitable organizations are not parties to this bankruptcy proceeding or creditor of the estate….The United States Trustee requests that the confirmation order include language providing that the Plan Administrator shall timely file post-confirmation operating reports with the Court until the case is closed, dismissed, or converted.”

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