The popular teen clothing company PacSun announced today that it is seeking chapter 11 bankruptcy protection due to mounting losses and intense competition in the industry. PacSun said it would continue to operate all of its 600 stores and does not expect the bankruptcy filing to have an immediate impact on employees. PacSun plans to work on strategies to stay viable in a changing marketplace as they work through the bankruptcy process.
Chapter 11 bankruptcy is intended primarily for the reorganization of businesses with heavy debt burdens most often associated with corporations, but is available to small businesses too. Chapter 11 allows the debtor to propose a plan for profitability post-bankruptcy, which may include reducing costs and seeking new sources of revenue or income, while temporarily holding creditors at bay.
To some extent, Chapters 11 and 13 are similar. Both types of bankruptcy allow debtors to continue in business and propose plans to restructure their finances. A chapter 11 or 13 plan can allow you to retain property needed to operate your business, give you time to sell assets you no longer need or cannot afford to keep, modify payment terms on secured debts and discharge obligations that you cannot pay over the plan term.
If you are a small business owner and are considering bankruptcy protection, contact the Peoria Law Offices of Charles E. Covey for help developing a bankruptcy strategy that fits your goals for your company’s future.