Long Island businesses and individuals who are saddled with overwhelming debt may get their finances back under control through declaring bankruptcy. There are several types of bankruptcy under U.S. law, and one of the most effective is Chapter 7, or liquidation bankruptcy, as it is sometimes called. It differs from other types of bankruptcy in some important ways.
Chapter 11, the other common form of business bankruptcy, is essentially a repayment plan. It allows filers to discharge some or all of their debt while they reorganize the company and make plans to pay off what remains within a set period of time. Chapter 7, however, requires selling a large share of a company’s assets to pay off creditors. In this sense, it is a much more extreme form of bankruptcy. However, it doesn’t necessarily represent the end of the line for a business.
Recently, coupon-book publishing company, Entertainment Publications LLC, filed for Chapter 7 bankruptcy. As part of the process, it began laying off employees and putting its assets — lists of customers, records, files, advertising materials and intellectual property, such as trademarks — up for sale to the highest bidder. This must have been a sad occasion for the people who built this 50-year-old company.
However, the ultimate buyer for all these assets was none other than the son of the company’s founder. He is reportedly now revamping the company to start up operations again and has begun hiring back a majority of the company’s former employees.
Chapter 7 is available for individuals as well as businesses and it has some powerful advantages and serious drawbacks for either type of filer. However, it doesn’t necessarily mean the end of a business or the last-ditch effort of an individual. It can often mean a new beginning.
Source: Crain’s Detroit Business, “Son of founders buys Entertainment Publications out of bankruptcy for $1.75 million,” Ryan Felton, April 25, 2013