Why companies in the black seek Chapter 11 protection | The Colpitts Law Firm
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Bankruptcy May Be Your Option

Why companies in the black seek Chapter 11 protection

When it comes to ensuring the continued success of a company in Oklahoma, decision makers are often left to make difficult choices. Even companies that seem to be profitable must look to the future. In some cases, this includes filing for Chapter 11 bankruptcy protection.

Some people often wonder why companies that seem to be making money file for bankruptcy. For example, Rue21 recently filed for bankruptcy even though, in 2016, it earned $54 million. However, companies that take such action often do so because they are predicting financial struggles in the future, as they are aware that their current balance sheet is no longer working.

Often, even companies that seem to be making money struggle to make their debt payments. By taking preemptive action, they hope that they will come through bankruptcy proceedings a more compact, reorganized company. With a successful bankruptcy petition, companies can break leases, allowing them to close stores that are losing money. While many companies wait too long to file for bankruptcy, having the ability to do so can help them avert a financial disaster.

Some speculate that retailers in Oklahoma and across the country may look toward Chapter 11 bankruptcy in the coming year. Between stiff competition with huge companies such as Wal-Mart and Amazon, and a holiday season that did not meet expectations, choosing such an option may be the best way to preserve the company. An attorney with experience with such proceedings can help companies evaluate their situation and choose the best course of action, as well as the most appropriate time to pursue it.

Source: USA Today, "Why retailers are filing for bankruptcy when they aren't yet broke", Nathan Bomey, Jan. 4, 2018

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