Discussions and news articles about too much debt often focus on individual consumers and their bankruptcy options. However, many businesses also deal with overwhelming levels of debt that make it nearly impossible to continue regular operations. What some California business owners may not realize is that, like individual consumers, they can also address their debt through bankruptcy. Chapter 11 bankruptcy can help businesses reorganize to promote their future profitability.
Too much debt is not a problem isolated to consumers. Despite their best efforts, some businesses in California find that they can no longer address their debts. This was apparently the case for FTD Cos., which recently filed for Chapter 11 bankruptcy.
Many California companies have used the bankruptcy remedy to achieve an economic reorganization and emerge from bankruptcy in good operating condition. It may seem counter-intuitive, but there are numerous investment companies that are willing to consider putting money into companies that have filed a Chapter 11 bankruptcy, which is the business reorganization chapter of the federal Bankruptcy Code. Investors may take a percentage of ownership in the company in return for infusing fresh capital into the enterprise.
Building a business from the ground up is no small feat, and many California business owners face financial ups and downs along the way. Recovering from those downs can be difficult though, especially for businesses that have expanded to include franchises that span multiple states. In some of these cases, a Chapter 11 bankruptcy filing might be the most appropriate option.
USA Gymnastics apparently struggled financially after a web of corruption and abuse hit California headlines in 2016. The sports organization recently filed for Chapter 11 bankruptcy, which will allow it to restructure. It has recently been hit with many lawsuits from former gymnasts, but it claims that this filing will not affect any of the women's claims.
Since 2017, over two dozen U.S. retailers have filed bankruptcy. Now, Mattress Firm joins their ranks. The brick-and-mortar mattress retailer is pursuing Chapter 11 bankruptcy and plans to close hundreds of stores across the nation, and some California locations are likely to be affected.
Brookstone recently announced that it will close all of its stores located in shopping malls. The announcement came shortly after it filed for debt relief through Chapter 11 bankruptcy. However, the news is not all bad -- California consumers can still find Brookstone products online and in its airport locations.