Bankruptcy isn’t just for individuals who have gotten in over their heads financially. Businesses, too, can deal with their debt problems by filing for bankruptcy protection.
Chapter 11 bankruptcy is most often used by indebted businesses as a way to “reorganize” their debts and keep operating after the reorganization has taken place.
As we discussed in a previous post describing the different types of bankruptcy, Chapter 11 allows businesses to repay creditors through a plan that is approved by the bankruptcy court. Debts that cannot be repaid are then discharged.
Last week it was reported that the struggling pizza chain Sbarro has emerged from bankruptcy reorganization after filing for Chapter 11 bankruptcy in March. The filing came a month after the company closed more than 180 stores in the United States. The reorganization plan was approved in May and it took effect last week.
As part of the plan, the pizza chain will be moving its headquarters from New York to the Midwest in order to reduce operating costs. The move will also bring the headquarters closer to the company’s new Pizza Cucinova business, which allows customers to make their own pizzas.
The company doesn’t think it will need to make any more significant store closings as it tries to get back on its feet and build excitement over the new Cucinova restaurants. The first of these stores opened in October, and they attempt to capitalize on a consumer market that is increasingly interested in fresh, healthy food options.
Chapter 11 can be an excellent option for struggling businesses that want to stay in operation while getting back on track financially. An experienced bankruptcy law attorney can provide more information about the Chapter 11 process as well as other options for businesses that are facing serious debt.
Source: The Associated Press, “Sbarro Says It Exited Bankruptcy Protection,” June 3, 2014