This blog recently discussed how business bankruptcy options can help struggling businesses. As is true of personal bankruptcy, there are both reorganization and liquidation bankruptcy options for struggling businesses and the best option depends on the needs and goals of the business.
A North Carolina-based bicycle store is closing its doors throughout the country. One of the nation’s largest bicycle stores will close 102 stores nationwide as part of the bankruptcy process. The company operates stores in 20 states. The stores are in the process of liquidation. The liquidation process will involve discharging debts, usually to obtain the greatest amount possible to repay creditors.
At the time of the bicycle company’s commercial bankruptcy filing, the business that bought the company two years ago reported debts of $100 million. At the time of the purchase, the bicycle company had reported revenues of between $275 and $280 million. The bicycle company was actually in substantial debt to the company that purchased it at the time of the sale which was conducted to keep the purchasing company from becoming insolvent.
The bicycle company has shown declining sales over the past six years and is considered another victim of the shift in retail from brick and mortar stores to online. When a struggling business wants to stay in business, Chapter 11 business bankruptcy can help it reorganize debts with the goal of returning to profitability. However, if the company plans to go out of business, a liquidation bankruptcy option may be best. Any business that is facing challenges should be familiar with the different bankruptcy options available to help.