Retirement Communities Filing Bankruptcy

According to Newsweek, many retirement communities are getting hit hard with by residents filing bankruptcy. This leading many of these communities to themselves file for bankruptcy, leaving the elderly worried about what will happen to them and their homes.

Erickson Retirement Communities recently filed for Chapter 11 bankruptcy in Texas. The company has more 12,000 workers and manages 19 assisted living communities across 11 states.

Along with their $1 billion debt, the company owns more than $1billion in assets and has over 250 creditors. The company wants to reorganize their debt and is in the process of selling their business to a local investment firm.

According to the Baltimore Sun, the company claimed filing for bankruptcy was needed to restructure their debt, split their management and real estate businesses into separate entities and prepare the company for the sale. Said Erickson’s CEO and President Bruce R. Grindrod:

“ We’ve been in negotiations for quite some time now an with all the various lenders…it became clear that in order to execute on the …sale of the company we were going to need to rung to the courts for supervision.”

A couple different factors have played into the company filing for bankruptcy. Erickson’s real estate department has been hurt by the recession and wanted to separate the risk of real estate from the management corporation to avoid any future debt.

Another factor behind the bankruptcy filing was Erickson’s development of assisted living communities outside of Maryland. As the real estate market crashed, they had trouble finding seniors to buy new homes. They were unable to restructure their loans with the strict credit market.

Erickson Retirement Communities said their bankruptcy filing should have no effect on their residents.

The complex structure of Erickson Retirement Communities includes a separate non-profit organization that handles the resident’s deposits. The non-profit organizations are not included in the bankruptcy filing. In many cases residents put down a very large deposit for their apartments which in most cases guarantees the elderly a home for the rest of their lives.

The deposit is refundable to the resident when they leave or it is given to their heirs if the die. The residents also pay monthly fees to pay for their apartment.