Petersen Health Care’s sale of a number of its nursing homes is facing delays as a creditor is calling into question the Illinois-based nursing home operator’s ability to file for bankruptcy.

According to an article in WCBU Peoria, the dispute centers around whether Petersen can file for bankruptcy on behalf of eight properties currently being managed by a court-appointed receiver, Michael Flanagan.

Petersen Health Care operates numerous nursing homes across Illinois, Iowa, and Missouri.

The creditor – X-Caliber Funding – objected to Petersen’s bankruptcy filing, arguing that the company cannot represent these properties in bankruptcy due to the receiver’s management. They raised trust issues and concerns about Petersen’s management record, citing instances of mismanagement and poor conditions at some facilities, WCBU reported.

In response, Petersen defended its position, stating that a streamlined sale of all properties would benefit lenders and allow for some recovery for unsecured creditors. They denied allegations of mismanagement and improper fund usage, asserting that their cash management complies with regulations.

Attorneys for Petersen told the court in March that Petersen intends to sell its properties to multiple buyers.

The legal dispute has led to delays in the bankruptcy process, prompting the federal bankruptcy court to encourage both parties to resolve their differences outside of court – noting that the risk of prolonged legal battles could cause uncertainty for nursing home residents and their families.

Further hearings are scheduled for May, with the judge urging the involved parties to find a compromise.