When business owners encounter financial challenges, they often face a large amount of stress and many decisions that need to be made. For business owners who have multiple locations, it may be only a single location that is struggling, or at worst it is the chain as a whole. Some business owners may decide to simply close their doors, even though this may not be the only option. But, for many businesses, Chapter 7 bankruptcy could be a potential solution that they did not initially consider.
Crumbs Bake Shop, a bakery with over 10 locations throughout New York, surprised its workers and customers when it recently closed all of its locations. The company has not filed for bankruptcy thus far, but some reports suggest that the company will soon file for Chapter 7 bankruptcy. Many industry experts find it surprising that the company would shut down without a prior filing for bankruptcy. Even if the company enters liquidation through Chapter 7, there are many remaining decisions to be made, some of which relate to the company’s existing leases for its various locations.
A Chapter 7 bankruptcy filing is commonly called a “liquidation” bankruptcy because it involves discharging unsecured debts to help both individuals and businesses regain firm financial footing. Contrary to many people’s perceptions, Chapter 7 bankruptcy does not have to mean that the filer will lose all assets.
Both businesses and individuals can file for Chapter 7 bankruptcy, which has the benefit of stopping or preventing credit harassment. In addition, the filing can help people dealing with wage garnishments or dealing with frozen bank accounts. A bankruptcy filing can reduce the stress experienced by business owners and individuals, simplify financial problems and enable them to regain control.
Source: Real Deal, “Crumbs’ abrupt exit leaves questions for landlords,” Tom DiChristopher, July 9, 2014