Corporate bankruptcy seems to be all over the new in the United States today. Some major companies to file for bankruptcy recently are Diesel, Payless ShoeSource, and the once might Marie Calendar’s food restaurant chain. One company that also joins this list is the budget clothing behemoth store, Forever 21. This may come as a shock to you, especially if you are a millennial who used to love shopping at these stores. Sales are down and the traffic in malls are not what they used to be, especially with the push to online shopping. It is sad to see this once powerful company being forced into bankruptcy due to the harsh world of American business.
Chapter 11 Bankruptcy
In the United States the majority of companies filing for bankruptcy will file for Chapter 11 Bankruptcy. Chapter 11 Bankruptcy is also known as “reorganization” bankruptcy. This type of bankruptcy is designed mainly for corporations or partnerships that have to file for bankruptcy. Individuals can also seek Chapter 11 Bankruptcy protection if they own some sort of business. The Chapter 11 usually consists of the debtor making payments back to their creditors over time if they want to continue their business going into the future. The fees for filing for Chapter 11 Bankruptcy are a $1,167 case filing fee and a $550 miscellaneous administration fee. This does not include any fees that will be charged by your attorney, make sure to discuss with your attorney ahead of time to talk about what their fees will be to handle your bankruptcy case.
Forever 21 Situation
Forever 21 is one of the largest retail clothing stores in American. They currently have more than 800 stores and is family-owned. The company plans to shut down at least 100 of their current location because this is part of their restructuring plan according to a Bloomberg report. It is not crystal clear why they are currently in financial troubles but many would argue that they tried to grow too big too fast. This caused the company to over leverage itself and some stores did not perform up to par. The company believes they will become stronger after the bankruptcy.
Benefits of Chapter 11 Bankruptcy
Forever 21 may look like they are in trouble at this moment in time but they actually may be a much stronger company after the bankruptcy is complete. The first benefit that they may be able to get in the bankruptcy is the opportunity to close certain stores cheaply and easily by being able to escape costly leases. This is especially important for the company if they have some stores whose sales are very low and are just draining their money each month. The next benefit that we wanted to include was that during the Chapter 11 Bankruptcy process the business is allowed to continue its operations while paying off its debts. Many businesses benefit from this because they are able to restructure their debts while still being able to continue running their business. Customers become accustomed to visiting the stores on a consistent basis so it could be detrimental to the future of the company if they are forced to cease operations during the bankruptcy process. The Chapter 11 Bankruptcy process also allows debtors to pay back part of their unsecured debts. This is good for the company because they may not have to repay back the entire amount but instead just a small portion of it. The last benefit we wanted to mention is that during the automatic stay period, creditors will not be able to contact the business demanding debt repayment. This can be especially helpful to the business owners because running a business is stressful already, it makes life even more stressful to have creditors harassing you every single day.
The Future for Forever 21
Forever 21 was founded in 1984 and has grown at rapid rates to become the apparel behemoth that they are today. Even though it may seem like they are struggling in the short term, going through a Chapter 11 Bankruptcy might be very beneficial for the company going into the future. It will be interesting to see what the future holds for the Forever 21 company. With the high costs of retail leases, employee costs, and utilities bills, it can be hard to keep physical locations in this day and age. The world is changing, the move to digital distribution is real, maybe Forever 21 will have to move into warehouse and sell their products online if they want to have longevity to last generations. It will be interesting to see what they future holds for the Forever 21 company, but as of this moment in time, the next chapter in their book is Chapter 11 Bankruptcy.
Final Thoughts
Forever 21 is not the first and will definitely not be the last major business to file for bankruptcy. It will be interesting to see in the future what other companies will fall victim to a similar fate. If you are interested in filing for bankruptcy yourself or have any questions we can help with that process. We at The Weller Legal Group have over 20 years of experience in helping our clients with their bankruptcies and working on improving their credit scores. We have offices located all throughout Florida, including, Clearwater, Port Richey, and Lakeland. If you have any other questions in regards to filing bankruptcies or working on improving your credit score feel free to give us a call today at 1-800-407-3328.
