Bankruptcy may feel like financial failure, but as they say in boxing, the round isn’t over until the bell rings. And bankruptcy is far from a final bell. It is often a timeout designed to help people and businesses get themselves in order.
The type of bankruptcy that is best often depends on the levels of debts involved and an entity’s hopes for the future. Chapter 7 bankruptcy, or liquidation, may be best for people with a lot of debts and no real assets to protect. Chapter 13, often called reorganization, may be best for people with fewer debts or a steady stream of income.
Chapter 11 bankruptcy is mostly used by businesses that have hit hard times. Chapter 11 may offer owners and managers the opportunity to settle most debts over a period of time and get rid of some assets that are costing more than they are profiting.
A major housewares retailer recently filed for Chapter 11 bankruptcy. The papers filed in court show $59 million in losses, although the company claimed to secure $250 million in additional funding from lenders.
This comes at a time when major retailers have been suffering under the increased costs of maintaining large facilities at malls and other locations just as many consumers are switching to online retail. Much like others, the company was in the process of closing many of their less profitable stores, including locations throughout New York and Connecticut.
Businesses and people who need more information about bankruptcy may consult an attorney. A lawyer can look at the amount and nature of debt while working toward possible solutions with lenders and prepare for a bankruptcy filing if that is the best conclusion.