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Common Concerns & Questions About Bankruptcy

Number of retailers filing for bankruptcy climbing

| Apr 5, 2017 | Chapter 11 |

Although the economy has been steadily climbing out of the Great Recession, for many retailers in Texas and other parts of the country, financial difficulties linger. When crushing debt and limited cash flow leave these stores with an uncertain and bleak future, many of them turn to the bankruptcy system for assistance. In fact, one recent report found that just as many retail stores have sought bankruptcy protection in the first quarter of 2017 as did during the entire 2016 calendar year. Amongst these stores are Gander Mountain, Gordmans Stores, HHGregg, Wet Seal, and Limited Stores.

So why are there so many retailers seeking bankruptcy protection during a time when the economy continues to grow? There are a number of reasons. First, and perhaps the most obvious, is a changing marketplace. During a time when online retailers like Amazon dominate, physical stores may struggle to not only obtain new business, but also keep their current customer base. Second, many consumers are shifting their spending toward travel and other experience-based purchases. Third, increased interest rates have left private equity firms, who have bought up struggling retailers, in a position where they are unable to adequately invest in the store’s critical areas of operation.

Experts think that we are on the verge of seeing even more business bankruptcy filings, and that many of them will convert from Chapter 11 bankruptcy to Chapter 7 liquidation bankruptcy. One of the driving factors behind these conversions is changes to the bankruptcy code that were made in 2005. These changes shortened the amount of time that a business has to reorganize or pay off its debt under Chapter 11 and Chapter 13 bankruptcy filings. Those who fail to meet the shortened deadline are left with liquidation as their only option for debt relief.

Trying to run a struggling business can be stressful, and it can be made worse when creditor harassment takes hold. Yet, debt relief options are available. To learn more about what can be done to ease business debt burdens, those who are struggling can discuss the matter with an experienced attorney.

Source: CNBC, “Retail bankruptcies march toward post-recession high,” Krystina Gustafson, March 31, 2017