According to an article in the American Medical News, LifeMasters Supported SelfCare Inc. has filed for Chapter 11 bankruptcy and hopes to continue operating the company during bankruptcy as a debtor in possession. The disease-management company has told the bankruptcy court that it has sufficient cash to continue operating but is filing Chapter 11 bankruptcy because of debt created after the company participated in several Centers for Medicare & Medicaid Service projects that were financially straining failures. The company wants companies who participated in the project to repay the fees they earned in excess of generated savings; but they felt it would be better to file bankruptcy as opposed to fighting for the fees with a lawsuit.

The article said:

“Rather than endure a costly and time-consuming legal path to challenge CMS, we have chosen to restructure our CMS and other liabilities through the Chapter 11 process,” company president George D. Pillari said.”

Chapter 11 bankruptcy is an excellent tool for gaining negotiating leverage with creditors, because once bankruptcy is filed, creditors are unable to take any collection actions against the debtor.  This doesn’t just apply to companies such as LifeMasters, but to individuals who may face credit card lawsuits or even other types of civil lawsuits.