52:27D-346. Bankruptcy proceedings
a. The commissioner may apply to a court of competent jurisdiction or to the federal bankruptcy court, if that court had previously taken jurisdiction over the provider or facility, for an order authorizing the commissioner to appoint a trustee to rehabilitate or to liquidate the facility if, after notice and hearing pursuant to the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), the commissioner determines that:
(1) A portion of a provider's reserve fund escrow as required pursuant to this act has been or is proposed to be released;
(2) A provider is or will be unable to meet the pro forma income or cash flow projections filed pursuant to section 7 of this act, except in a manner that may endanger the ability of the provider to fully meet its continuing care contract obligations;
(3) A provider has failed to maintain the reserves required under this act; or
(4) A provider is bankrupt or insolvent, or in imminent danger of becoming bankrupt or insolvent.
b. An order to rehabilitate a facility shall direct the commissioner or trustee to take possession of the property of the provider and to conduct the business thereof, including the employment of managers or agents that the commissioner or trustee deems necessary and to take those steps the court directs toward removal of the causes and conditions which have made rehabilitation necessary.
c. If the court finds, upon petition of the commissioner, trustee or provider, or on its own motion, that the objectives of an order to rehabilitate a facility have been accomplished and that the facility may be returned to the provider's management without further jeopardy to the residents, creditors and owners of the facility, and to the public, the court may, upon a full report and accounting of the conduct of the facility's affairs during the rehabilitation and the facility's current financial condition, terminate the rehabilitation and order return of the facility and its assets and affairs to the provider's management.
d. If the commissioner determines that further efforts to rehabilitate the provider would be useless, the commissioner may apply to the court for an order of liquidation.
e. The court may issue an order of liquidation upon application to the commissioner, whether or not a prior order to rehabilitate the facility had been issued. The order shall act as a revocation of the certificate of authority issued to the facility pursuant to this act. The order shall direct the commissioner or a trustee to marshal and liquidate all of the provider's assets located within the State.
f. In applying for an order to rehabilitate or liquidate a facility, the commissioner shall give due consideration in the application to the manner in which the welfare of persons who have previously contracted with the provider for continuing care may be best served.
In furtherance of this objective, the proceeds of any lien obtained by the commissioner pursuant to this act may be:
(1) Used in full or partial payment of entrance fees;
(2) Used on behalf of residents of a facility that is being liquidated; or
(3) Paid, on behalf of those persons, to other facilities operated by providers who hold a certificate of authority issued pursuant to this act.
g. The court shall refuse or vacate an order for rehabilitation if the provider posts a bond by a surety authorized to do business in this State and executed in favor of the commissioner on behalf of persons who may be found entitled to a refund of entrance fees from the provider or other damages in the event the provider is unable to fulfill the terms of its contracts to provide continuing care at the facility. The amount of the bond shall be equal to the reserve funding which would otherwise need to be available to fulfill the provider's obligations, as determined by the court.
h. The commissioner or his designee shall attempt to keep residents of the community informed about his actions to rehabilitate or liquidate the facility and, when appropriate, the commissioner or his designee shall meet with residents of the facility.
L. 1986, c. 103, s. 17.