When is filing Chapter 11 is the right business decision?

| Apr 16, 2020 | Chapter 11 Bankruptcy |

The clothing retailer, True Religion Apparel Inc, filed Chapter 11 this April after lengthy store closures hurt its business. This filing is the second time the company filed Chapter 11 in three years. Though the company will maintain its e-commerce business, its CEO made a statement that its major lenders have provided additional capital to reorganize the business through bankruptcy court proceedings. 

Finding the best bankruptcy plan for your circumstances

For those businesses affected by store closures, it will likely be those that can persist while incurring significant expenses that will avoid liquidation. If your business is having difficulties with its finances, you should familiarize yourself with the benefits of filing Chapter 11 compared with Chapter 7. 

  • Chapter 11: A Chapter 11 filing typically represents a business reorganization, where a company can work with lenders in a bankruptcy court to determine the best means of organizing itself to produce necessary payments while retaining more of its assets. The company files its plans through a bankruptcy trustee who oversees business operations and plans to pay back creditors. 
  • Chapter 7: Chapter 7 bankruptcies typically involve the liquidation of a business’s assets to pay back money owed to creditors, as well as the liens and mortgages that may be attached to specific properties. This form of bankruptcy will cause significant losses of property and assets, but it can also discharge or defer certain debts. Sometimes a bankruptcy trustee will operate the business for a time if it will improve the total proceeds for its creditors.

Dealing with your debts

If you’re considering a bankruptcy filing, you need to contact an attorney experienced in corporate bankruptcy proceedings to explore the options for your business.