For decades, restructuring practitioners in the senior living industry have operated under an unwritten assumption: Residents of entrance fee-based continuing care retirement communities (CCRC), despite holding unsecured claims, would in practice be treated as a protected constituency. Sponsors, lenders, and courts have accepted outcomes that preserved resident recoveries, even when doing so meant secured creditors absorbed disproportionate losses. That assumption is no longer reliable. A wave of post-COVID-19 pandemic Chapter 11 filings in the CCRC sector reveals a shift toward reduced recoveries for resident entrance fee claims. This article traces that shift through recent transactions; examines the financial, operational, and structural forces driving it; and offers practical guidance for professionals navigating this changing landscape.
Why Residents Were Historically Considered ‘Protected’
As a matter of black-letter bankruptcy law, entrance fee refund obligations have never carried priority status — residency agreements are generally treated as executory contracts, and unpaid refund claims are unsecured. Historical practice, however, ignored this reality. Wary of the reputational and regulatory fallout from impairing elderly residents, sponsors and secured creditors frequently accommodated resident claims — often at bondholders’ direct expense — to preserve going concern value and avoid publicity that could chill future sales.
Maintaining resident confidence was essential to preserving the underlying business model. Entrance fee CCRCs depend on a steady stream of new sales to fund operations and repay departing residents; thus, any outcome perceived as reneging on refund promises risks chilling future sales. Because buyers of distressed CCRCs historically preferred to continue the Type A, or “life care,” contract — the model built around entrance fee in exchange for lifetime access to increasing levels of care — preserving resident confidence was essential to the community’s marketability and long-term viability.
Together, these forces meant entrance fee claims often recovered well in excess of what strict bankruptcy priority would have dictated. That dynamic was visible in CCRC restructurings, including SQLC Senior Living at Corpus Christi (2019), Timothy Place NFP (2020), and Buckingham Senior Living Community (2021), where residents owed entrance fee refunds emerged largely unimpaired while bondholder recovery suffered.
What Post-COVID-19 Pandemic Transactions Show
Preferential treatment for residents has visibly eroded — so much so that entrance fee obligations, once treated as close to untouchable, are increasingly treated as another lever in a restructuring.
Buckingham Senior Living, a Houston-based CCRC, illustrates this dynamic. At the conclusion of its first bankruptcy in 2021, Buckingham secured $28.5 million in new bond financing and committed to repaying $38.1 million in entrance fee refunds over time, leaving residents unimpaired. Its second filing, in 2025, produced a $100 million purchase offer that converted the community into a rental model, causing former residents’ entrance fee claims to be largely impaired. Similarly, in 2023, in Friendship Village of Schaumburg in suburban Chicago, former residents recovered approximately 10%, while secured bondholders recovered at a higher rate.
The Harborside, a New York CCRC, tells a similar story. Its 2023 bankruptcy filing — the community’s third since 2014 — resulted in an $82 million sale. Secured bondholders, owed approximately $168 million, recovered $73 million at closing plus a deferred $8.8 million. Residents settled for approximately $42.5 million against approximately $130 million owed — an approximately 30% recovery. Edgemere, a Dallas CCRC that filed bankruptcy in April 2022, initially causing residents’ entrance fees to be largely impaired similar to the Harborside. However, its sponsor, Lifespace Communities, voluntarily committed approximately $143.4 million to fund a resident trust rather than let a sale wipe out entrance fee claims entirely.
These outcomes reflect a shift in which resident recoveries are treated as a lever in restructurings rather than a given.
Drivers of the Shift
Several forces explain this shift — the incentives that historically led sponsors, lenders, and buyers to accommodate residents have weakened, while the financial pressures across the industry have intensified.
Industry-wide operating pressures have reduced operating margins available for buyers to fund resident claims. Rising labor costs, deferred capital expenditures, and competition from rental-based senior living models have compressed operating margins and reduced the funds available to honor pre-acquisition resident obligations. Entrance fee communities feel this pressure acutely because refunds to departing residents are funded largely through new residents’ entrance fees, and slower move-ins can turn a margin problem into a liquidity crisis.
Constrained enterprise values play a role. The sharp spike in interest rates during 2022-2023 raised the cost of capital across the sector’s largely bond-financed structures, causing additional pressure on CCRC valuations. In many distressed cases, legacy obligations now exceed total transaction value, leaving little or no residual value for unsecured resident claims.
Structural and legal factors compound the problem. Resident protections can vary within a single case: A plan may pay entrance fee deposits held under a state regulatory escrow order at 100%, while deposits outside that escrow recover only a fraction in the general unsecured class. Two residents with identical contracts can end up with drastically different recoveries based solely on whether a state escrow mechanism governed their deposit.
Refund timing is another source of variation. Plans often preserve refund rights on paper while shifting the real risk to when, or whether, payment ever arrives. The “refund queue” structure, in which a departing resident is paid only as new entrance fees are received or as cash permits, is becoming a common plan feature — often to residents’ detriment. Recently, several distressed buyers have pivoted to structuring transactions, particularly rental conversions, to minimize legacy refund liabilities. This pivot reduces the buyer’s need to sell future entrance fee contracts as well as the incentive to honor current and former resident refund contracts.
Changing lender and bondholder strategies round out the picture. Post-COVID-19 pandemic cases increasingly proceed through expedited Section 363 sales rather than negotiated reorganizations, with credit-bidding rights, debtor-in-possession financing terms, and bid procedures structured to protect secured recovery first. Lenders that extended accommodations in 2020 and 2021 have shown less willingness to do so a second time — Buckingham’s second bankruptcy, only four years after its first, is illustrative of that reduced tolerance. Overall, for secured creditors, the goal has shifted from preserving the going concern value of a franchise to maximizing a defined recovery.
Collectively, the above-mentioned factors demonstrate the unique recent shift in approach to addressing CCRC restructuring processes. Where the outcome has moved away from historical practices and closer to the type of buyer and transaction structure.
Practice Considerations
For restructuring professionals, a few practice pointers follow from this shift.
Diligence should start with a state-specific map of refund priority regimes — escrow requirements, statutory liens, and guaranty fund coverage vary enormously, and understanding a community’s specific protections early can materially impact negotiating leverage and case strategy.
Recovery modeling should reflect current transaction evidence rather than historical convention. Assuming near-par resident treatment is no longer a baseline for valuations or advice given to sponsors, lenders, or resident groups. Models should estimate resident recoveries across several outcomes, such as a going concern sale that preserves the life care model, a rental conversion, and a liquidation.
Negotiation strategy requires a clear view of when and how to advocate for resident committee formation. Early, organized resident representation improves information flow, reduces the risk of a contested plan or sale, and can create leverage for partial recoveries.
Finally, communication and reputational risk management deserve deliberate attention to both residents and sponsors. Timely, accurate communication with residents can reduce litigation risk. For sponsors, how a restructuring treats departing residents can shape the reputation and future marketability of any non-debtor communities, making resident treatment as much a strategic consideration as a legal or financial one.
Looking Ahead: Implications for Future Restructurings
Turnaround professionals working in the senior living sector should treat resident recoveries as a genuinely contested, negotiable outcome in every engagement, not an assumed floor. The recoveries will depend on deal-specific factors, including buyer objectives, the community’s capital structure, and whether the transaction preserves or abandons the underlying life care model. The identity and objectives of the party controlling CCRC’s restructuring may influence resident recoveries as significantly as the applicable legal priority scheme.
Transactions over the next several years will likely determine whether today’s reduced recoveries become the sector’s new normal and whether they prompt a broader regulatory response.
This article was first published by the Journal of Corporate Renewal in November 2026.
Ankura Consulting Group LLC does not provide legal advice, and nothing in this article constitutes legal advice.
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC, its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
