Oct. 10--The government shutdown is delaying an Irvine medical company's exit from bankruptcy by at least a month -- and perhaps throwing its financial future into doubt.
American Medical Technologies had planned to end its Chapter 11 bankruptcy on Oct. 21. Instead the company will have to wait until Nov. 20, assuming attorneys for its largest creditors -- the federal Centers for Medicare and Medicaid Services and the Internal Revenue Service -- are back on the job.
U.S. Bankruptcy Judge Mark S. Wallace ordered the delay Monday over the company's objection.
If the case is delayed, the firm's attorneys warned, the company "may be forced to go out of business. ... In that event, hundreds of employees will lose their jobs and the creditors will not be paid."
Attorneys for the government said in court papers that during the government shutdown they "are prohibited from working, even on a voluntary basis, except in very limited circumstances, including 'emergencies involving the safety of human life or the protection of property.'"
"The Third Branch News," a digital newsletter of the federal court system, reported this week that government attorneys throughout the nation have filed many similar motions since the shutdown began on Oct. 1. In general, only criminal cases are moving forward without interruption, the newsletter reported.
American Medical Technologies specializes in wound treatment. The company, which has 312 employees, makes 90 percent of its money from Medicare.
The firm filed for Chapter 11 protection from its creditors on Feb. 24, 2012, in the midst of a billing dispute with Medicare. Medicare has filed a $76.4 million claim in the bankruptcy. The agency alleges the company collected overpayments for gastronomy tubes.
In addition the IRS has filed a $17.8 million claim.
The company in its bankruptcy plan says it will pay Medicare no more than that the firm believes Medicare owes it. American Medical Technologies contends the IRS filed its tax claim after the legal deadline and so cannot collect. The plan calls for company President Gerald Del Signore to contribute $6.5 million in cash to refloat the company.
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Original headline: Shutdown slows firm's bankruptcy exit
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