As any New Yorker can attest, the pandemic has impacted individuals and businesses in a variety of ways. While some may have experienced little to no impact when it comes to finances, many small business owners and major companies have experienced just the opposite. These unprecedented times have caused many businesses to face difficult decisions, especially when it comes to addressing debt they cannot overcome. In these matters, filing for bankruptcy may be the best and even the only option for them.
Century 21 files for bankruptcy
According to reports, the department store chain Century 21 recently filed for a Chapter 11 bankruptcy protection. The retailer announced that it would be closing all of its remaining 13 stores. Dozens of other retailers have faced the same fate due to the pandemic.
The difficult decision was based on the retailer’s insurance provider declining to pay around $175 million due in policies that they pay a premium for to protect the store against unforeseen circumstances, such as the losses it suffered during the pandemic.
The insurance company stated that pandemics are uninsurable; however, it was pointed out that insurance regulators approved exceptions for viruses are the SARS outbreak.
Chapter 11 bankruptcy
A chapter 11 bankruptcy is known as a reorganization bankruptcy. It allows a business to reorganize their debts, which in turn, helps them continue operations. However, maintaining operations may not be feasible, and liquidating assets may be necessary to repay creditors.
The bankruptcy process can be confusing, emotional, taxing and time consuming. Therefore, one should take the time to fully understand the process and what to expect from it. This not only helps a business prepare for the process itself but also for what post-bankruptcy will look like.