AN elderly woman had shelled out nearly $1 million to stay in an assisted living facility under the promise of a refund.
The nursing home, however, went bankrupt, and a key stipulation in the Chapter 11 procedures left the senior out hundreds of thousands of dollars.
An elderly woman was out hundreds of thousands of dollars after her nursing home filed for bankruptcy[/caption]
Arlene Kohen, an 89-year-old widow, moved into the continuing care retirement community called Harborside in Port Washington, New York – a suburb of New York City – in January 2020.
The facility, located on Long Island, required Kohen to pay the industry-standard $945,000 entrance fee as well as $5,700 per month by the end of her stay.
To help pay for her entry at the six-story, 500,000-square-foot luxury complex, the woman sold her family home in Great Neck, New York, located on the North Shore of Long Island, for $838,000.
Kohen was informed that, should she pass away or choose to leave Harborside, 75% of the entry fee would be refunded to her or her family.
However, Harborside’s financial troubles meant that the business went back on its promise.
HOME HORRORS
Harborside has struggled since it opened in 2010, shortly after the subprime mortgage crisis, pushing the facility to eventually file for bankruptcy three times.
Prospective residents had a tough time selling their houses to afford the luxury senior care center’s entrance costs ranging from $425,000 to $1.7 million.
The community struggled to fill its 229 independent-living units, driving its first bankruptcy filing in 2014.
Harborside claimed bankruptcy for the second time in 2021 after the pandemic further halted new move-ins, then a third time in 2023.
The owner finally sold the company to an investor who is reducing the level of care available in order to cut costs, per The Wall Street Journal, forcing Kohen to move out because she required more extensive care.
The bankruptcy process prioritized secured creditors over residents, meaning that the 89-year-old’s family will likely see under a third of the $710,000 refund that Harborside promised.
“That’s money that I’ll never see,” Beverly Kohen Fried, Kohen’s daughter, told The Wall Street Journal.
Out of roughly 210 current and former Harborside residents, 187 accepted the Chapter 11 plan that will hand back up to 32% of their entry fees, totaling around $121 million.
The U.S. Sun reached out to Harborside for comment.
SENIOR STRUGGLES
Similar to Harborside, a number of senior care facilities have struggled in the wake of the Covid-19 pandemic because they were unable to secure enough new move-ins.
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
The entrance fees from new residents often go toward paying down part of the construction debt.
Roughly 50% of the approximately 2,000 entrance-fee-based senior care facilities in the US relied on these payments for their daily operations in 2023, per a recent analysis by CARF International.
Around 16 or more of these centers have filed for bankruptcy since March 2020, per a Wall Street Journal review of court filings.
The slew of Chapter 11 filings wiped out over 1,000 families’ savings totaling roughly $190 million over a few decades.
Over 200 of those families were in Harborside, a Harborside lawyer revealed at a bankruptcy court hearing in May.
The investment company Focus Healthcare Partners recently bought Harborside out of bankruptcy.
Curt Schaller, principal of the firm, said he is “sympathetic to the situation,” but shared that Focus had no say in how the sale proceeds were divided between bondholders and Harborside residents.
Harborside was not the only company that was hit hard by the pandemic.
For example, a legacy furniture chain with over 95 locations filed for bankruptcy after 37 years – and only half will remain open.
Plus, the pandemic helped drive Joann’s bankruptcy, leading to closing down sales and hundreds of shutdowns.
Harborside filed for Chapter 11 three times, leaving resident Arlene Kohen without the refund she was promised[/caption]
