How many times have you seen a store advertising “Everything Must Go?” It’s becoming more and more common as brick and mortar retailers are being squeezed out by e-commerce companies that offer consumers the opportunity to shop 24 hours a day, with free shipping and easy returns, as well as the ability to comparison shop from the comfort of their couch. These flagging sales and other financial issues often lead to bankruptcy filings.
When a retail business files for bankruptcy, they can choose between a Chapter 11 filing and a Chapter 7 filing, with the former allowing the business to continue operating while reorganizing their debt repayment and the latter requiring the liquidation of assets. In a Chapter 7 bankruptcy, the liquidation of assets means more than just the sale of the goods on the shelves and racks: it means selling every asset that the company owns to raise money to repay its creditors.
A Chapter 7 bankruptcy filing and liquidation follows specific steps:
Though store liquidations may seem like hectic and disorganized events, studies have shown that when retailers take a deliberate approach to the process, they are able to increase their recovery, thus satisfying more of their creditors. Strategies such as providing higher markdowns at the beginning of the liquidation process have been shown to boost foot traffic, and that’s an important advantage in the face of the time constraints retailers dealing with liquidation often face.
If you own a retail business and you are considering filing for bankruptcy, having a strategic advocate on your side can provide a big benefit. Call us today to set up an appointment to discuss the options available to you.