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.