Payless is now following suit with other major retailers and filing for bankruptcy, closing hundreds of stores and shifting their focus towards online sales. They are filing for Chapter 11 bankruptcy in hopes that it will allow them to start in the direction of restructuring their business model and remain competitive in a rapidly evolving market that is moving farther away from in store shopping, showing a major increase in online sales.
Chapter 11 grants companies protection from creditors for a fixed amount of time to give them a chance to reorganize once the company’s liabilities drastically outweigh the assets. Payless has $1 billion worth of assets to work with and $10 billion worth of liabilities to contend with. Although Chapter 11 does provide the ability to reorganize, it is also quite costly and risky to proceed with and does have the consequence of removing publicly traded companies that file for this type of bankruptcy from the stock market during the period of restructure.
The logic behind allowing companies to file for Chapter 11 in the first place is simply the belief that in some scenarios, forgiving some companies’ debts and allowing them to continue operating under the assumption of new, better management is more financially beneficial to the creditors than liquidating the entire business and getting rid of all the jobs that would go along with it. JCPenney, Sears and Macy’s have fallen to the same fate after being department store moguls for several decades.
Filing for bankruptcy can be beneficial to your business and possibly save it, but you need someone trustworthy and knowledgeable who can guide you every step of the way. Contact Brenner, Brenner, and Spiller today.
