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Plus-Size Retailer Breaks Record for Fastest Business Reorganization


Chapter 11 reorganizations tend to take much longer than the Chapter 7 liquidations that most consumers are familiar with. The duration of a Chapter 11 is easily explained, since businesses hope to continue to stay in operation while reorganizing their debt. It takes time to come up with a debt reorganization plan and to get it approved, either by creditors or the bankruptcy court.

However, Bloomberg has reported that one company, Fullbeauty Brands, was able to make a quick Chapter 11, getting their plan approved in under a day. This is certainly a record for a business using Chapter 11.

Creditor Support for Reorganization

The centerpiece of a Chapter 11 bankruptcy is a plan to “reorganize” debt. Basically, this means deciding how much of a haircut its creditors will take. Few creditors will receive 100% of what they are owed. But many creditors fight any attempt to impair their rights to payment of debts. Creditors are lumped into different creditor classes, and they must vote on whether to approve a plan. Even if they reject it, a bankruptcy judge can still approve the plan over their objections.

One reason why Fullbeauty Brands Inc. was able to complete Chapter 11 so quickly was that all creditors were on board with the reorganization when they filed. Fullbeauty had over $1 billion in debts that they needed to reorganize. Based on their plan, they will cut about 90% of that debt, which should free up money that would otherwise go to debt service.

Creditors did not support the plan automatically. Instead, according to Fullbeauty’s legal counsel, months of negotiations preceded the initial bankruptcy filing. The attorneys used the prospect of bankruptcy as leverage in the negotiations to get everyone on board.

Another reason the bankruptcy was completed so swiftly was that Fullbeauty is an online business that does not have any stores. A physical footprint will probably slow down a bankruptcy, as a company needs to evaluate which stores to keep open and which to shutter.

Judge Approves in Record Time

Judge Robert Drain gave his approval for the reorganization plan verbally in under a day, signing the official order later. In support of his approval, he cited the unanimous support of Fullbeauty’s creditors as well as the fact that the company’s international suppliers probably would not want to business with a U.S. company in bankruptcy.

The previous record for completing a Chapter 11 was 2 days, set in 2006 by Blue Bird Body Co. We’ll have to wait to see if another business can get their Chapter 11 approved in under a day.

Experienced Chapter 11 Bankruptcy Attorneys

Chapter 11 is mostly used by large businesses and individuals with too many assets to qualify for a Chapter 7 or 13 bankruptcy. At Nowack & Olson, we have experience helping businesses reorganize their debts, and we are always open to taking to new clients.

To discuss your company’s financial distress, please reach out to us today. We have offices around South Florida, including Plantation, Boca Raton, Miami, and Jupiter. You can call 888-813-4737 for more information or to schedule an initial consultation.




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