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Bankruptcy may benefit companies before they lose profits

Most people are aware that businesses failing to bring in profits may need to seek outside help to fix their financial situations. However, experts have reported that many businesses, retailers in particular, have chosen to file for bankruptcy before the company begins losing money. This may be a helpful option for Louisiana business owners who are looking to cut down debts.

Chapter 11 is a common form of bankruptcy filed by companies. This form allows businesses to restructure their finances, giving them a fresh start. In most cases, companies may close some stores as part of the bankruptcy process, but the majority are often allowed to remain open to continue servicing consumers.

In many cases, companies wait until they start seeing significant decrease in profits before filing for bankruptcy. Several retailers, such as Rue21 and Payless ShoeSource, have recently chosen to file for bankruptcy before experiencing a decline in profits. While this may seem counterintuitive to some, it actually proved beneficial in these circumstances. Filing for Chapter 11 preemptively allowed these retailers to break leases on stores that were losing money and cut down loans while still bringing in profits from the remaining stores.

Whether a business is seeing declining profits or simply finds itself in significant debt due to other factors, filing for Chapter 11 bankruptcy may be beneficial. Anyone interested in learning more about Chapter 11 and how this form of bankruptcy may help could consult an experienced Louisiana bankruptcy attorney for more information. Additionally, an attorney could aid in filing and any related legal proceedings.

Source: USA Today, "Why retailers are filing for bankruptcy when they're not (yet) broke", Nathan Bomey, Jan. 4, 2018

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