Retailers And Chapter 11 Bankruptcy During The Pandemic

With so many Americans spending so much of the last several months primarily at home, it likely comes as no surprise that retailers – those who own retail stores and produce and supply retail goods for consumers – have struggled in the face of the ongoing COVID-19 pandemic. This is especially true when it comes to the fashion sector. Yahoo Finance recently published an article spotlighting the fact that this year-long health battle has come with dozens of major retailers around the country seeking the protection of Chapter 11 bankruptcy. According to another report, the pace at which bankruptcy filings by major retailers is occurring has slowed down significantly compared with last fall. However, while striving toward a financial restructuring, many retailers are continuing to face challenges with everything from the availability of supplies to overall finances.

Understanding Chapter 11 Bankruptcy 

No two cases of bankruptcy filings are alike, and similarly, a Chapter 11 filing is very different from a filing under Chapter 7 although generally speaking businesses can file under either. Chapter 7 bankruptcy effectively results in a liquidation of assets. That means that the entity or individual filing for bankruptcy helps to pay as many creditors as possible by selling assets. Chapter 11, on the other hand, enables debt to be restructured which means that those who file may continue operating at the same time as the restructuring so that debt repayment becomes more manageable with the ideal goal of the debt being reduced altogether.

Why Have So Many Retailers Filed for Bankruptcy Lately? 

Retailers have long turned to the protections of bankruptcy when becoming burdened by heavy debt loads. And the unfortunate reality is that many businesses, and especially those specializing in retail, have become burdened with additional debt during the course of the pandemic. Between stay-at-home-orders and the temporary closing of so many public places, many retailers unfortunately took a significant hit in revenue over the last year. Turning to a Chapter 11 filing can help a company end up with significantly less debt than it began with and even enable it to close stores that are not profitable. This is highly beneficial as these two factors can be essential in helping a retailer avoid even more losses when it is already financially strained.

Are You a Retailer Struggling With Mounting Debt? 

Many retailers have been adapting to these unprecedented circumstances as best they can as the pandemic continues to unfold. Despite even the best efforts, however, any retail business can become swamped in debt and that is more true now than perhaps ever before. As the Plantation bankruptcy attorneys at Nowack & Olson, PLLC, we understand the unique struggles faced by retailers and we have witnessed first-hand how filing for bankruptcy can help these challenges be overcome. We are dedicated to helping our clients achieve their financial goals and we use all available resources to help them secure the financial future that they need. We welcome the opportunity to review your case and advise you of your best course of action. Contact us today to schedule your free consultation.

Resources:

wsj.com/articles/retail-bankruptcy-filings-have-seen-marked-slowdown-since-fall-11615800600

finance.yahoo.com/news/apparel-retail-bankruptcy-court-040105639.html