Chapter 11
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Bankruptcy Liquidation Goes Online for Nashville Luxury Retailer
Bankruptcy is often the natural path when a retailer’s sales go from $1.3 Million in 2009, to $890,000 in 2010 and then on track to do less than $700,000 in 2011. That’s what happened with The Gallery at Belle Meade in the Green Hills area of Nashville. The Gallery sells art, upscale furniture and accessories.
When it filed for Chapter 7 bankruptcy, the retailer stated that it had about $380,000 in assets and over $2.7 Million in debts. Now many of those assets are being auctioned off online from August 16th through August 25th. You can check out the auction at McLemore Auction Company.
The Gallery could have chosen to file a Chapter 11 bankruptcy and continue its operations. Most Chapter 11 bankruptcies begin with the idea of continuing the operation of the business. The business owner gets time to try and work through the financial problems. However, as is often the case, sometimes an owner waits too long to seek the protection that a Chapter 11 can provide. If the Debtor is unable to formulate a plan that meets the requirement of the bankruptcy code a liquidation of assets such as we are seeing with the Gallery is often the result.
When a Chapter 11 is filed your creditors must immediately stop collection efforts. The cost of defenses of lawsuits in both time and money is often reduced. The owners can focus on just restructuring the business. Perhaps the business needs to close some of its locations like what happened in the Borders (book seller) bankruptcy. Sometimes a business simply needs time to delay making significant payments on debt and use the funds from operations to re-capitalize the business.
One thing a Chapter 11 will not do is increase revenue. Sometimes business owners increase revenue while in Chapter 11 because they are able to focus only on the actual operation of the business and not the daily dodge of debt collectors.
With the Gallery, the owners likely determined that an orderly liquidation of its assets would yield the greatest return for its creditors. As a result it chose to file a Chapter 7 bankruptcy. In Chapter 7 a Trustee is appointed to oversee the liquidation of assets. Once the assets are sold, the Trustee distributes the funds to creditors based upon the priorities established by the bankruptcy code. Although in this instance it appears assets are being liquidated, in most Chapter 7 cases filed in Knoxville no assets are sold either because they are encumbered by liens for more than their value or the assets are claimed as exempt by the Debtor.
Contact Knoxville – Sevierville Bankruptcy Attorney Dan Scott
If you are facing financial difficulties, don’t delay getting advice from an experienced bankruptcy lawyer. We assist clients from Knoxville, Maryville, Pigeon Forge, Sevierville and Jefferson City. We offer a free consultation so you can understand all of your options. Call TODAY at 865-246-1050.
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Is a Chapter 11 on the Menu for Fast-food Pizza Chain Sbarro?
Reuters is reporting that perhaps next week shopping mall food court favorite Sbarro may seek bankruptcy protection as it obtains over $30 Million of financing. The financing would be available for operations while Sbarro restructures its indebtedness.
Lenders sometimes condition loaning operational money upon the filing of a Chapter 11 case and then obtaining court approval of what is know as debtor-in-possession financing. Most of the Chapter 11 cases filed in Knoxville don’t see this type activity. However, in the major business centers with larger and perhaps “mega-cases” debtor-in-possession financing is a common occurrence. By requiring bankruptcy court approval a lenders obtains certainty in its security position on the collateral.
It’s easy to see that sometimes the filing of a Chapter 11 Bankruptcy case may simply be a tool for the survival and growth of your business. Our firm has been involved as attorneys for the debtor a variety of cases including, hotels, restaurants, car washes, doctors, lawyers (but no Indian chiefs). If your business is struggling during these difficult times don’t delay consulting with an experienced bankruptcy attorney. Delay in developing a plan is often a key factor to an unsuccessful case.
Will Knoxville Real Estate Firms Follow Florida’s Stirling Sotheby’s International Realty into Bankruptcy
A long and deep recession claimed another victim this week. Stirling Sotheby’s International Realty, a well known and respected real estate brokerage company with over 100 agents filed Chapter 11 bankruptcy a few days ago. No doubt the Florida real estate market was the first to experience the huge downturn, but other locales including East Tennessee have long been feeling the pressure of no buyers and no lenders willing to finance buyers.
When a company like Stirling files bankruptcy, it makes one wonder will Knoxville real estate firms soon follow. For most real estate brokerage companies the only revenue comes from closing sales. Visit any Title Agency in Knoxville and you’ll see reduction in staffing, sometimes closed offices and in many cases a completely closed shop. This is true because lenders, fearful that they may make a loan that will be criticized by regulators, simply opt for no loans at all.
To get a brief understanding of the problem, just understand that Stirling has been in business for over 20 years. In its bankruptcy papers it listed $1.1 Million in assets but over $6 Million in debts.
The next step for Stirling is the filing of a Plan of Reorganization which will be presented to creditors for approval. This plan will likely pay unsecured creditors pennies on their debt but would allow Stirling to exit from bankruptcy and perhaps retain an opportunity to serve the real estate industry in the future.
Chapter 11 is often a good option to protect a viable business that has just gotten over-leveraged during its growth. The biggest mistake business owners often make is seeking the advices of an experienced bankruptcy attorney too late in the process. Early planning can make a difference in whether a Chapter 11 is successful or not. I offer a free consultation to help individuals and business owners assess their situation. Call my office at 865-246-1050 to set up an appointment today.
Sale of Nashville’s Sabre Assets in Bankrupty Not so Simple
Nashville arms dealer Sabre finds itself in the midst of a fight over who will end up with the company’s assets. Its principals have been indicted for gun trafficking and are awaiting extradition from the UK.
Not to worry, while the officers may be fighting criminal extradition, the battle rages for the actual assets of the company. Nashville’s daily newspaper, The Tennessean, reports that an Alabama company is ready to purchase the assets for $2.3 Million. E
Obviously this Company has lots of plenty of challenges. It is not likely that it will survive as an operating company. Section 365 of the Bankruptcy Code permits the sale of assets inside the bankruptcy. It may be that the owners are going to attempt to use this provision to liquidate the assets in an orderly fashion rather than having the sale on the courthouse steps.
Chapter 11 bankruptcy is often used to equalize the leverage between a debtor and a creditor after an event of default has occurred. The creditor is concerned only about liquidating its debt. The borrower, however, may also be concerned about paying other creditors, including the Internal Revenue Service whose debt can seldom be discharged in a bankruptcy.
One thing that can be learned from the Sabre bankruptcy is that the creditors don’t hold all the cards. Be careful that your company doesn’t expend all of its assets fighting off your creditors before you engage experience bankruptcy attorney. I’ve helped level the tables by filing bankruptcy for Knoxville and Sevierville based companies since 1983.
7 Reasons Borders May Choose Chapter 11 Bankruptcy
I reported on this site a month ago that big time book seller Borders was on the verge of filing bankruptcy. The Wall Street Journal reported Saturday that it is likely that Borders will file a Chapter 11 on Monday or Tuesday.
It’s likely that the case is being filed sooner rather than later because the Chapter 11 process has the possibility of giving certainty to their status visa vie other creditors. Businesses often consider a Chapter 11 for benefits such as:
1. Stopping penalties on tax claims;
2. Gaining additional time to resolve litigation in the trial and appellate courts. Normally, during an appeal, a losing defendant would be forced to post a bond to prevent recovery of the judgment during the appeal. Not do, in a Chapter 11.
3. Freezing the statute of limitations on specific claims for recovery of monies.
4. Delaying the impact of claimed defaults by lenders.
5. Rejection of burdensome contracts such as employment contracts or suppliers contracts
6. Gaining leverage in restructuring indebtedness in a way that is advantageous to the business.
7. Securing priority for a lender who will only lend if it has certainty of its security and its priority of payment.
These are just 7 reasons a company might choose Chapter 11 as a business strategy. If your company is struggling be sure to understand that successful Chapter 11′s are well planned and executed. There are several keys to a successful Chapter 11. Read the rest of this entry »