A federal court has dismissed the bankruptcy case filed by Visinet, formerly a lead provider of foster care in the state.
The dismissal came after the state Department of Health and Human Services filed an objection Monday to a request by Visinet for an extension of time on a list of creditors filing.
HHS asked that the extension be denied and the case dismissed.
U.S. Bankruptcy Judge Timothy Mahoney dismissed the case Tuesday.
Todd Reckling, HHS director of the division of children and family services, would say only: "The pending bankruptcy case complicated our ability to continue to provide services to children and families."
Visinet officials could not be reached Tuesday to say whether the agency would refile.
Visinet filed for Chapter 11 bankruptcy April 8. The state then cancelled its contract with the agency to be one of five lead providers of foster care.
It is the latest crisis in out-of-home foster care reform that started in November.
The bankruptcy left about 360 Visinet employees out of work and scrambling for jobs.
John Hoffman, Visinet's chief operating officer, will go to work for KVC May 10 as vice president for client support services. KVC is a provider of foster care services.
Hoffman will report directly to KVC's chief operating officer for Nebraska, Sandra Gasca-Gonzalez, said Tami Soper, KVC public affairs director.
Another Visinet manager, Robin Chadwell, will become KVC's permanency director for the eastern service area, Soper said.
The bankruptcy and abrupt closing of Visinet foster care and other child services shocked employees. Many worried about whether they would be paid or if they would have health insurance through at least the end of April. Visinet's payment to the insurance company, due at the end of the month, had not been made in April.
The agency had expected the bankruptcy court would allow for wages and benefits to be paid through April 15, said Visinet CEO John Powers.
Some employees were pregnant, had doctor's appointments or surgeries scheduled, or had pending claims for themselves or family members who desperately needed those health insurance benefits.
A number of employees who spoke to the Journal Star said their lives and the lives of their co-workers were turned upside down. They were heartbroken, they said, that they never got a chance to say goodbye to the families with whom they worked.
Now, one worker said, they are just more people walking out of those children's lives.
Powers said Visinet had been prepared to lose $1.5 million the first year of the state foster care contract, but the agency's last calculation showed it could be much more.
Visinet is a small corporation, he said.
"We don't have a $100 million war chest," he said.
More foster children were assigned to the agency than expected, he said, and many had expensive needs.
The agency had asked the state for $600,000 so it could pay its bills through June 30 and allow for a smooth transition, but HHS officials said no to the emergency funding, Powers said.
"The whole thing is wrong-headed," he said. "The state has made a mistake."
Powers had said Monday night he was hoping the bankruptcy judge would release the funds -- $300,000 to $400,000 -- the agency needed to meet payroll.
That was before the case was dismissed.
When Visinet officials filed for bankruptcy, they had every intention of reorganizing, he said.
He and his business partner had invested everything they had in the for-profit business, Powers said.
And its employees were dedicated, he said.
"This is a disruption for everyone," he said. "It's not something we wanted."
Visinet gave the court a list of nearly 120 creditors that included nonprofits, mental health professionals, child service providers, HHS, the IRS, Douglas County, and phone and utility companies.
At the head of the list of the top 20 creditors were Boys Town, owed more than $200,000 by Visinet, and Owens and Associates of Omaha, which provides educational services, owed nearly $200,000.
The total of services from the top 20 creditors was $765,727. Some of them said they had provided services to Visinet for which they hadn't yet sent bills.
Judy Dierkhising, executive director of Omaha area lead provider Nebraska Families Collaborative, which includes Boys Town, said not having that money will make everyone's budgets tighter.
The verdict is still out on when or whether the lead providers will break even on their state contracts.
"It's such a young initiative," Dierkhising said.
But the state is engaged with the providers, she said.
"I think they're learning every day, too," she said.
Reach JoAnne Young at 402-473-7228 or firstname.lastname@example.org.