Jeffrey M. Rosenblum, P.C.
A Fresh Start

Clothing retailer files for bankruptcy protection

New York-based children's clothing retailer Ezrani 2 Corp. filed for Chapter 7 bankruptcy on June 18. The company operates a group of stores under the name of RUUM American Kid's Wear that sells clothing and accessories to boys and girls between the ages of 2 and 14. According to the Chapter 7 bankruptcy documents that were filed in Wilmington, Delaware, Ezrani 2 had $109,878 in assets and $65.7 million in liabilities.

Ezrani 2 was founded by the former CEO of The Children's Place. In 2012, Ezrani 2 purchased American Eagle Outfitters' younger brand 77Kids and renamed the store RUUM American Kid's Wear. The sale was recorded as a $35 million loss by American Eagle Outfitters.

Ezrani 2 owned 25 different RUUM American Kid's Wear stores across 11 states in 2014. The company also sold its children's clothing line through an online shopping website. As part of the Chapter 7 bankruptcy plan, Ezrani 2 plans to liquidate all of its assets. It is unclear how many creditors Ezrani 2 has outstanding debts with.

When a company has a substantial amount of debt and very few assets, filing for Chapter 7 bankruptcy might be in the best interests of the company's owners. Frequently referred to as liquidation, Chapter 7 bankruptcy can allow a debtor to have many of its debts discharged after a liquidation of all of their assets is completed and the proceeds used in part to pay off existing obligations. A bankruptcy law attorney may be able to help a business owner who is struggling with debt to determine if filing for Chapter 7 bankruptcy is the right move.

Source: BloombergBusiness, "Kidswear Retailer Ezrani to Liquidate Assets in Bankruptcy," Dawn McCarty, June 18, 2015

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