Hutcheson Medical Center's board of directors voted Wednesday night to file for Chapter 11 bankruptcy reorganization.
In a news release from Waterhouse Public Relations, Hutcheson officials said that the filing will "allow the hospital to restructure its debt for long-term viability may help protect the hospital from Erlanger's recent efforts to foreclose on the hospital's property."
Hutcheson has been unable to repay $20 million it borrowed from Erlanger Health System and is facing a threat of foreclosure. In January, Erlanger filed a civil lawsuit against Hutcheson, who was supposed to pay back the $20.5 million loan by Dec. 1 of last year.
Erlanger officials could not be reached for comment after the news release was issued at 9 p.m.
On Tuesday, Hutcheson held the last of three public meetings to take public input on the hospital's financial woes. Many hospital employees and some members of the public said they fear the loss of their local hospital if the issue can't be resolved.
Hutcheson has said it shouldn't have to repay the money, claiming that Erlanger did not live up to its own obligations when it was managing the Fort Oglethorpe hospital under an management agreement.
The $20 million owed to Erlanger is only about a third of Hutcheson's total $60 million in debt. Current hospital leadership blames the financial swamp on previous leaders who made bad business decisions.
In the news release, Hutcheson President and CEO Farrell Hayes said the reorganization plan would allow the hospital to "continue its primary mission of serving the healthcare needs of North Georgia residents."
"We heard first hand from local residents at our three public hearings that closing the hospital would be devastating to the public interest of North Georgia citizens," Hayes said.
"We also hope that our filing for reorganization will stop the Erlanger foreclosure, give us a fresh start, and allow us to continue taking care of the 160,000 residents in Walker, Dade, and Catoosa."
Hutcheson board Chairman Corky Jewell said in the release that seeking bankruptcy protection also allows the new hospital board and administration to "restructure the debt inherited from the old Board and compounded by the mismanagement that is the subject of the hospital's current counterclaim in the lawsuit initiated by Erlanger."
"We fully expect Hutcheson to join that list of companies who have emerged from Chapter 11 reorganization even stronger than before," Jewell said.