Like many cities in Texas, Tyler has a proud history of entrepreneurship and small business development. While that environment always comes with its ups and down, business owners can be forgiven if it felt like 2017 packed a harder punch than usual.
There is an all-too-common understanding in business here in Tyler and throughout the country that bankruptcy is the end of the line. Certainly, when business profits shrink, operations struggle and debts take over, something will need to change. But when that change is achieved by filing for Chapter 11 bankruptcy, the business does not necessarily have to call it quits altogether.
For years people in Texas and across the nation flocked to RadioShack to purchase electronics. However, the retailer fell on hard times, and eventually filed for bankruptcy twice. In fact, it has recently completed its second bankruptcy, but things are not the same as they once were.
Although the winter holidays are still a few months away, some people in Tyler, Texas may have already gotten a head-start on their holiday shopping. For those with children, finding the most popular toys of the season may already be on shoppers' radar. Therefore, they may be surprised to hear that the popular toy retailer Toys R Us has filed for Chapter 11 bankruptcy.
Dealing with financial problems is never easy for Texas businesses. While some debt problems can be overcome with some simple budgeting and saving strategies, major debt problems often require more aggressive steps. While just hearing the term bankruptcy is likely to induce concerns and fears, this process can actually provide real and rational solutions for businesses dealing with too much debt.
Sometimes even the best of businesses in Texas can fall on hard times. Whether it is a downturn in the economy, an increase in competition or an unexpected loss of sales, a business may find itself floundering in a sea of debt. For some businesses, the best way out of this debt is through filing for Chapter 11 bankruptcy, also known as a reorganization bankruptcy. This can especially be useful, as filing for Chapter 11 bankruptcy can put an automatic stay on creditor actions.
When a Texan is moving forward with a Chapter 11 filing, there are certain aspects that must be considered as the case is moving forward. One is the conversion or dismissal. This grants the debtor the right to convert a Chapter 11 to Chapter 7. This is a one-time right unless the following is in effect: the debtor is not a debtor in possession; the case began as an involuntary Chapter 11; or the case was previously converted to Chapter 11 in a way that was other than at the request of the debtor. With Chapter 11, the debtor cannot have the case dismissed on request as an absolute right.
A small business that is experiencing problems in Texas and across the United States will often consider filing for bankruptcy. One question that comes to forefront during this time is whether filing for Chapter 11 bankruptcy is better than other alternatives like Chapter 7. The reality is that for businesses that would like to continue operating, Chapter 11 is generally viewed as the better option. In fact, many believe that Chapter 7 for businesses is simply an admission that the end is near and the choice of Chapter 7 is the final concession.
The theory behind Chapter 11 is certainly attractive. Create a space of time, under legal auspices, to work out a reorganization plan with creditors on how to pay off excessive debt. Typically, this vehicle is used by Texas businesses, large and small.
No industry is immune from financial difficulties. Although the news often reports on businesses such as retail stores and restaurants filing for bankruptcy, the truth of the matter is that even fields like the healthcare industry can run into money woes, forcing medical businesses and even hospitals to take legal action to protect themselves.