If your business has taken on heavy debt that could easily become unmanageable, then you may have a number of debt relief options. For many businesses, Chapter 11 bankruptcy is too costly and time-consuming to make economic sense. For other companies, however, Chapter 11 offers the protections needed to get the business back into profitability.
That is the hope for women’s clothing retailer Fresh Produce. The company, which filed for Chapter 11 bankruptcy protection in April, recently sold its assets to the investment group Blue Stripe LLC, which is in part made up of the original founders of Fresh Produce.
Blue Stripe will use the Fresh Produce brand to conduct business, and the company’s products will continue to be sold wholesale, online and at retail locations in some states, including California.
The deal allows the retailer to continue operations, although 12 stores that have under-performed are expected to be closed in the next two months.
One of the benefits of Chapter 11 is that it can allow you keep your business running while you address debt issues through restructuring. However, you don’t have to assume that bankruptcy is the only option if your business has incurred heavy debt.
Depending on the circumstances, there may be cost-efficient, out-of-court solutions such as negotiating debt, restructuring debt, exchanging debt for equity, or renegotiating interest rates. Companies are also able to avoid bankruptcy by addressing debt issues in state court.
For more on that, please see our previous post on Article 9 of the Uniform Commercial Code.