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Texas hotel faces bankruptcy

The part-owner of the Hotel Fredonia in Nacogdoches said the decision to file for personal bankruptcy was not easy. Nevertheless, the decision finally came down on Dec. 16, when owner of the hotel filed Chapter 13. She is not alone, as 23,000 other Texans have filed for the bankruptcy protection in 2013.

Chapter 13 consists of the reorganizing of debts in a way that the debtor can more reasonably expect to pay them off. The actual hotel is not included in her Chapter 13 as it will have to be handled using bankruptcy law that applies strictly to businesses rather than individuals. The Chapter 13 may help give her a fresh start in paying off her debts.

An attorney with four decades of financial experience said that debtors go through great emotional upheaval when their situation reaches a point that may include bankruptcy. Bankers will generally work with the debtor to find a solution until there are no other options but bankruptcy.

The parent company that owns the hotel in partnership has not filed either Chapter 11, which is a business bankruptcy, or Chapter 7, which is business liquidation, so a bank foreclosure will continue to move forward. Keeping the hotel in foreclosure could mean that a buyer will show interest at the lower real estate auction price rather than purchase it outright from the owner, which would be at a higher price.

When debt becomes overwhelming, there may be alternatives that an attorney could suggest. The proper path may be determined by individual circumstances and be carefully weighed before making a decision that will affect future financial health.

Source: KTRE, "Hotel Fredonia owner: Bankruptcy not an easy choice", Donna McCollum, December 16, 2013

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