Some banks turn to bankruptcy to help them forestall seizure. According to The Wall Street Journal, the Premier Bank Holding Co. did just that when it became apparent that bank regulators could take over their chain of Tallahassee, Florida banks at any time. The bank has been struggling with losses after many customers were unable to pay back any of their loans. While more and more customers went bankrupt, the bank started to carry the weight of unpaid expenses, and eventually lost too much money to function. Premier Bank Holding Co. has decided to issue a Chapter 11 facilitated sale of their only asset, a seven-branch unit of Premier Banks. They are hoping that they sale can bring in enough money for the holding company’s estate. If the effort doesn’t prove to be successful, then the banks will be lost to the Federal Deposit Insurance Corporation.

Premier’s self-sale was taken up by BancShares Inc. in Arkansas. They want to purchase the Premier Banks in a deal that will cost between $16.4 million and d$21.4 million. The executives at Premier are interested in the Arkansas offer, but still plan to hold an auction to see if any better offers come forward. They want their banks to be recapitalized to about $15 million. The sale of the bank stock alone was not enough to cure the capital shortfalls, which is why they have decided that they need to sell the chain too. The company was granted $9.5 million from the U.S. governments’ Troubled Asset Relief Program, but this wasn’t even enough to protect them from having to file for bankruptcy. In court documents, the company says that it has about $282 million in assets, but that includes $179 million in loans. They don’t want federal regulators to come take over their operations, and have decided that they will gladly move to their last resort: a Chapter 11 bankruptcy.

While The Wall Street Journal describes the move as “risky,” it is one of the new strategies that many banks are taking when it’s time to make a new move. The risk factor comes in the form of uncertainty, because federal regulators still have a right to take over the Premier Bank Holding Co. at any time. Capitol Bancorp Ltd. is another financial institution that recently chose to file for bankruptcy to avoid federal regulators. They said that they were dangerously close to failing at the time of the filing. This entity has operations in Indiana, Michigan, Arizona, Georgia, Missouri, Ohio, North Carolina, New Mexico, and Oregon, and has about $2 billion in assets. They are trying to negotiate a debt-for-equity swap with creditors at present so that they can get backing on their feet financially.

Both Premier Bank Holding Co. and Capitol Bancorp Ltd. hope that they will have the same success that was displayed by AmericanWest Bank and Outsource Holdings Inc. when these banks filed for Chapter 11 bankruptcy in the past. Both banks were able to come out ahead after filing and selling some branches. While these banks are taking a hug risk, they hope that they will be able to rise up after their bankruptcy declaration. If you are short on finances, you may need to do the same. When times are tough, you may fall behind on payments and rack up debt. If you are constantly being contacted by creditors, or you are at risk to foreclosure, then talk to a bankruptcy attorney today. With the right lawyer on your side, you may be able to declare bankruptcy and discharge some of your debts. You will also be able to put a stop to creditors who are threatening to spark a lawsuit or seize your property.