This blog recently discussed how Chapter 11 bankruptcy can help struggling businesses. Sears recently announced that it will close an additional 40 stores as part of its Chapter 11 bankruptcy process to help it in its efforts to return to profitability. The retailer is currently in the process of closing 188 stores including at least 4 in North Carolina, including one in Raleigh. Both Sears and Kmart stores are included in the store closures.
Following all of the closures, the company is expected to have fewer than 500 location remaining open. The company estimates that if it survives the Chapter 11 bankruptcy protection process, 400 stores could remain profitable on their own. As this blog recently discussed, the Chapter 11 bankruptcy process for businesses is a reorganization bankruptcy and the goal of the process is for the company to stay in business and return to profitability.
The Chapter 11 bankruptcy process is different from the Chapter 7 bankruptcy process which is a liquidation bankruptcy process in which the company will no longer remain in business. The Chapter 11 bankruptcy process permits the struggling company to shed some of its expenses while it seeks new sources of revenue to help with its debts with the intention, goal and hope that the struggling company will be able to remain in business. The company continues operating during the bankruptcy process until it is concluded.
A Chapter 11 bankruptcy process, like all bankruptcy processes, is supervised by the bankruptcy court which will work with the filing party to develop the reorganization plan and ensure it is adhered to. Both reorganization and liquidation bankruptcy options are available to struggling businesses and consumers to help them get back on their feet which is why it is important to thoroughly understand all of the options available.