By filing for Chapter 11 bankruptcy to pursue business reorganization, Illinois businesses or corporations can present the bankruptcy court with a plan for their operations to become profitable once again.
A company that files for Chapter 11 can hold off creditors during the course of the bankruptcy proceedings since, upon filing, creditors are required to go through the court system to collect debts. At the same time, creditors are barred from calling, writing or otherwise contacting the reorganizing company outside of the proceedings. By seeking new payment arrangements with creditors through business bankruptcy, a company may be able to obtain a fresh financial start.
Recently, Mark Shale, an Illinois specialty clothing retailer, filed for Chapter 11 bankruptcy. The company has a plan for business reorganization and seeks to attract an outright buyer, investment or financing. According to court documents, the company suffered a 60 percent drop in sales in the most recent fiscal year, which led to a cash shortage that left the retailer unable to fulfill orders.
If Mark Shale’s efforts at reorganization do not succeed, the company may be able to add value by selling fixtures, equipment and any remaining inventory. Pending approval from the bankruptcy court, Mark Shale has planned a clearance sale at the company’s three retail locations.
While Chapter 11 restructuring may provide a company with the breathing room it needs to amend their practices, alternately, Chapter 7 bankruptcy is another option for businesses facing financial challenges. Through Chapter 7, a company can liquidate its remaining assets in order to repay creditors.
Mark Shale’s President and Chief Financial Officer said that the filing was “the best alternative” for the company. Likewise, for many businesses facing mounting debts and collections from creditors, business bankruptcy in the form of Chapter 11 reorganization or Chapter 7 liquidation may provide an opportunity to achieve relief.
Source: Chicago Tribune, “Mark Shale clothier files again for bankruptcy,” Corilyn Shropshire, Aug. 22, 2012
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Illinois retailer seeks Chapter 11 bankruptcy, offers plan