Dealing with financial troubles is not easy on anyone. This is especially true for those who run a business. Competition is high for those going against major companies such as retailers. Keeping up with trends and keeping a constant cash flow can be difficult during tough economical times. When a company is struggling to make ends meet, it might mean it's time to go through business debt negotiations or file for business bankruptcy.
It was recently reported that the New York clothing chain Loehmann's just filed for bankruptcy. This is the third time the 92-year-old company has filed for bankruptcy and will most likely be the last time it will file. Due to heightened competition, the chairman explained that the company had no other choice but to file.
By filing for a chapter 11 bankruptcy, the company gets a fresh start. This is very similar to what Macy's did. It will protect them from creditors while they attempt to re-manage their business plans. Due to amendments in federal bankruptcy laws made in 2005, it is often challenging for retailers to file and restructure the business.
It can sometimes be a challenge to emerge from bankruptcy under the same ownership, but the amendments also give little wiggle room with regard to keeping or breaking a store lease. This often causes retailers to sell or liquidate assets because they do not have time to restructure. This has led Loehmann's to seek out a buyer prior to their filing for bankruptcy. This might be the most practical option for their situation.
Filing for bankruptcy is often a very difficult decision to make, but for some it is a necessary one. Those considering bankruptcy should seek to understand their options and what appropriate actions they should take. This could help protect their interests and rights.
Source: ABS-CBN News, "Why bankruptcy is no friend to struggling US retailers," Nick Brown, Dec. 21, 2013