A Chapter 11 bankruptcy filing by a commercial entity in New York or elsewhere can certainly signal the end a business life span for a company that has simply become overwhelmed by debt and other problems over time.
That is not always the case, though, as we note at R3M Law Moser, LLP. Although the seasoned commercial lawyers at our Manhattan law firm have helped many companies close their doors in the most efficient way possible on businesses that can no longer compete in the marketplace, we have also helped diverse clients across many industries effectively reorganize through Chapter 11. As we note on a relevant page our firm’s website, we can often “use the reorganization process not only to eliminate debt, but to lay the groundwork for a long-running and successful business.”
Having said that, it is important for business principals to know that the utility of Chapter 11 depends on the material facts existing in any given case. A commercial bankruptcy filing is not a panacea for every management team facing dire challenges. As we further stress on our site, Chapter 11 “is not always the only option available to businesses and should not be the first alternative.”
When it is properly deemed to be a solid business strategy, though, the benefits of Chapter 11 can be considerable.
One national retailer certainly hopes that is the case, as reported in a recent CNN article. That report notes that the national perfume discounter Perfumania is employing Chapter 11 in hopes of establishing “a foundation for sustainable long-term growth.”
The company is focused upon shuttering doors on scores of underperforming mall-based stores across the country in order to better the bottom line on notably profitable units. Its management believes that invoking Chapter 11 might help it do that.
Again, Chapter 11 — which is a comparatively complex form of bankruptcy — must be closely studied in a given case to determine whether it might reasonably be employed as a strategy for a business facing severe financial challenges. A law firm with a proven team of debt-relief attorneys can answer questions and provide candid guidance on that subject.