Retail Bankruptcies On The Rise Means A Rise In Personal Bankruptcies Too

Retail businesses are closing and filing for Chapter 11 bankruptcy at a record rate.  According to data provided to CNBC from AlixPartners consulting firm, nine retailers have filed in the first three months of 2017, equal to the number for all of 2016, and more than 3,500 stores could be closed within the year. This has impacted Ohio shopping centers and malls, as people tend not to shop in centers where there are lots of vacancies.

When businesses close and file for bankruptcy, personal bankruptcies rise accordingly, as people lose their jobs and are unable to make their payments and pay their bills.

Fortunately, there is a bright side to bankruptcy.  For businesses and individuals alike that are struggling, bankruptcy can provide options to help either to stay afloat or to close in an efficient manner. And for individuals overwhelmed with personal debt, bankruptcy provides an opportunity to have a fresh start and relief from debt.

There are several options for bankruptcy and debt relief.  The law is complex, so it is crucial to get legal assistance to avoid making mistakes.

The skilled and seasoned Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer offer a free consultation to evaluate your personal financial situation. We can help determine if you qualify to file a bankruptcy, and if a Chapter 7 or Chapter 13 would be better for your individual financial situation.

Why Retailers Are Failing

The increasing popularity of shopping online is probably the biggest reason major retailers across the country have taken such a hit.  Consumers find it more convenient to make purchases online instead of in person. Physical stores and retail personal are expensive to maintain, and there are just too many stores, especially those that sell clothing.

In addition, the increase of store purchases by private equity firms, up an average 31 percent in the past five years, makes the situation worse. These leveraged buyouts occur when a private equity firm buys undervalued retailers, hoping to cut costs and make more profit.  However, since the equity firm uses a combination of equity and debt to purchase a firm, it increases its debt while often failing to invest sufficient money in critical areas to save the business.

Also, more retailers who enter Chapter 11 bankruptcy are ending up in liquidation. That is due to a 2005 change in the bankruptcy code, shortening the time retailers have to gain approval for sale or reorganization to 210 days.  Since liquidation sales run 90 days, this does not give retailers time to shape up.

What Chains Are Affected?

Department stores, electronics retail, and apparel shops are at highest risk, and the safest are the food and home improvement industries. Chains targeted by private equity firms that are struggling to turn around their businesses include names like J. Crew and Claire’s Stores.

Year-to-date Chapter 11 filings include:

  • Gordmans Stores
  • Gander Mountain
  • General Wireless Operations (formerly RadioShack)
  • HHGregg
  • BCBG Max Azria
  • Michigan Sporting Goods Distributors
  • Eastern Outfitters
  • Wet Seal
  • Limited Stores

The Dayton Daily News has listed Ohio retail stores that have announced closures:

  • 500 to 1,000 stores: PAYLESS— could also file for bankruptcy
  • 552 stores: RADIO SHACK— the second time in two years that RadioShack has filed bankruptcy
  • 250 stores: THE LIMITED— has filed for relief under chapter 11
  • 240 stores: FAMILY CHRISTIAN
  • 170 stores: BEBE —has filed for bankruptcy and closed all store locations
  • 160 stores: CROCS
  • 150 stores: GAMESTOP
  • 138 stores: JC PENNEY— including four in Ohio
  • 120 stores: BCBG—has filed for reorganization under Chapter 11
  • 110 stores: AMERICAN APPAREL
  • 108 stores: KMART
  • 88 stores: HHGREGG—is closing 88 stores, four in Ohio, and laying off 1,500 employees
  • 70 stores: STAPLES 
  • 70 stores: CVS
  • 68 stores: MACY’S— is eliminating more than 10,000 jobs
  • 60 stores: ABERCROMBIE & FITCH—has eliminated 150 corporate positions
  • 60 stores: GUESS 
  • 42 stores: SEARS— lost $2.2 billion in sales last year
  • 30 stores: GANDER MOUNTAIN

Types of Business Bankruptcy

Chapter 7 Bankruptcy

Any business can file for Chapter 7 bankruptcy, but only sole proprietors can have their qualifying debt wiped out (discharged). Sole proprietors are responsible for business debts, so bankruptcy would include both personal and business debts and assets.

Chapter 7 bankruptcy makes it easier to terminate, because the trustee will be selling product, fixtures, or equipment, attempting to collect accounts receivable, and settling with creditors. This may save the business money by avoiding further litigation.

Chapter 13 or 11 Bankruptcy

Chapter 13 is most helpful for individuals and sole proprietors, as the owner’s personal finances get included in the reorganization plan. There are debt limits to Chapter 13 and if your business debt exceeds the amount allowed, or if you are a partnership or corporation, you may be able to achieve similar benefits in Chapter 11 bankruptcy.

Chapter 13 or Chapter 11 bankruptcies do not liquidate a business; they allow the business to reorganize and pay back its debts under better terms.  The business can continue operating and has a chance to recover, as long as it can make the monthly payments agreed upon.

A business that is a separate legal entity, such as a corporation, should be able to file bankruptcy independent from the business owner, who should not be personally responsible unless debts were personally guaranteed.

Chapter 11 is used mostly by larger, established companies as it may be too costly for a small business with a limited income.

Contact Us and Get Help

With so much at stake, it’s important not to undergo the bankruptcy process alone. At Fesenmyer Cousino Weinzimmer we provide a free initial consultation where we will evaluate your entire financial situation.  We examine your income, your debts and your goals, and then discuss the best fit for you. If bankruptcy is the right step, we are there to file for you, represent you in court, help rebuild your credit and fight for you every step of the way.

Delaying can only make matters worse, so call the experienced Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer today.  Call one of our conveniently located office branches at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) or email for your free consultation so we can determine what debt relief solutions will work best for you.

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