Court approves RadioShack's Chapter 11 settlement

After a "challenging" eight months, RadioShack has been awarded approval of its Chapter 11 bankruptcy plan. The case shows how complicated dissolving a once-major retailer can be.

As our readers surely know, RadioShack struggled for years before filing for bankruptcy protection in February with more than $1 billion in debt. The company has already closed or sold nearly all of its 4,000 retail locations. All that remained was to reach settlements with its major creditors, which was no easy task.

The settlement came after extensive negotiations, according to The Wall Street Journal. It will allow most of its secured lenders to be paid in full, though creditors lower down on the list will be left with relatively little in compensation, the Journal reports. In exchange for junior creditors agreeing to the settlement, Standard General LP and Wells Fargo, two major creditors, will contribute as much as $9.4 million to a liquidation trust, along with other parties.

In granting final approval of the settlement, the bankruptcy judge presiding over the case noted that it "has been a very challenging case." The Chapter 11 plan does not resolve a lawsuit brought by junior creditors against RadioShack's directors for allegedly breaching their fiduciary duty.

Going through Chapter 11 bankruptcy can be challenging, but it is often the best solution for a business struggling to pay its debts. The question of whether your business should consider Chapter 11 or another form of bankruptcy should be made clearer after a discussion with a bankruptcy attorney.

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