Women's clothing retailers across the country, including in Pennsylvania, have had a particularly bad year, with several national chains filing for bankruptcy. The latest company to file for Chapter 11 relief is a well-known bra and lingerie seller with stores in the western part of the country. The company also markets a catalog nationwide and online.
A Chapter 11 bankruptcy is generally a reorganization procedure allowing a business in Pennsylvania or elsewhere to get rid of some of its debt and negotiate restructuring of other debt, thus perhaps allowing the company to keep operating with a modified debt structure. In some instances, particularly those in which a company has planned carefully in advance and has the assistance of experienced bankruptcy counsel, it may file for bankruptcy and continue to operate straight through the process, coming out of the bankruptcy in a stronger economic position than before. Another benefit of a Chapter 11 filing is that a company may continue to operate without interruption of its business affairs and without a shutdown of its retail outlets.
In Pennsylvania and other states, a crippling money judgment against a company may result in the company deciding to file bankruptcy. In some instances, that may be done to delay the execution of the judgment pending appeal, and to allow for possible reorganization of other debts of the company. In some cases, a bankruptcy may be filed where multiple lawsuits or verdicts threaten to exceed the capacity of the company to pay, such as in the case of many simultaneous asbestos judgments.
Every once in a while, the filing of a Chapter 7 bankruptcy in Pennsylvania or another state marks the end of life for a cherished local tradition. It may be an ancient landmark connoting a significant historical event. It could be an old hotel that catered to the rich and famous, perhaps a favored watering hole and popular night spot, or a restaurant famous to the local people. Although few would like to see it close forever, there are no economic pathways that lead forward, and the announcement is made to close the doors via Chapter 7 bankruptcy.
All types of businesses, including in Pennsylvania, have taken advantage of the federal bankruptcy laws to reorganize their affairs and attempt to stay in business with a streamlined new business approach. The legal vehicle for that attempt is a Chapter 11 bankruptcy filing. That chapter of the Bankruptcy Code is known generally as the business reorganization section.
The Bankruptcy Code allows a business in Pennsylvania or elsewhere to file a Chapter 11 bankruptcy. This reorganization provision is generally a plan to restructure the finances and activities of the company and remain in business. Some companies, however, may need Chapter 11 only as a transitional phase where they will continue to operate at least partially, but under a plan that, in the end, will lead to final closing and liquidation.
A Chapter 11 bankruptcy gives a business entity the chance to significantly reorganize its debt structure in an attempt to find a viable way to remain operating. That solution also generally benefits the creditors, who otherwise might get a far lower return in a Chapter 7 liquidation. The procedure and general legal principles are similar from state-to-state, including in Pennsylvania, because the bankruptcy laws are based largely on the federal Bankruptcy Code.
There are many business owners in Pennsylvania that are familiar with the ups and downs of the economy and the effect it can have on their overall business. This combined with other unexpected circumstances, such as unexpected weather events, can have a major effect on the success of a business. One out-of-state winery has recently filed for Chapter 11 bankruptcy protection.
Small businesses can file for a Chapter 11 or a Chapter 7 bankruptcy in Pennsylvania and all other federal bankruptcy districts. Chapter 11 is a reorganization plan that a business will file to reorganize its debts and business affairs, and hopefully continue to do business, even after the bankruptcy is ended. The business in a Chapter 11 ultimately wants to be discharged from the bankruptcy with a new lease on life and with the authority to continue doing business.