Bankruptcy can be a complicated and intimidating prospect for individuals and businesses in Texas and across the United States. Knowing whether or not the financial challenges have reached the level at which filing for bankruptcy is the best possible option, which classification to use and other issues often arise to muddle the decision and make it difficult to move forward. Those who believe that Chapter 7 bankruptcy is right for them need to understand the difference between Chapter 7 for businesses and the individual, and how creditors might respond to the filing.
The sporting goods retailer Sports Authority has been in Chapter 11, but the unsecured creditors for the company believe that it is preferable to convert the case and have a liquidation in short order through Chapter 7. The company went into bankruptcy in March and sought to sell some of its stores to continue operation. Because suppliers and lenders have been in dispute over the cash the company has left, it went forward with sales to clear its stock. The company was acquired by Dick's Sporting Goods at auction in June.
According to the unsecured creditors, the company is unable to pay for the cost of the bankruptcy and is therefore administratively insolvent. They believe that allowing the Chapter 11 to continue will worsen the situation for the unsecured creditors. By converting the case to a Chapter 7, there would be a trustee to end the case faster than it would end under Chapter 11.
Whether the bankruptcy filing is due to personal financial problems or issues with a business, it is imperative to know the proper method to use. Those who are considering filing for Chapter 7 bankruptcy or another choice in the bankruptcy code must have full grasp on the positives and negatives and which is best for them.
Source: Reuters, "Unsecured creditors seek quick end to Sports Authority bankruptcy," Tom Hals, July 22, 2016