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Sports Authority Files for Bankruptcy Protection

chapter 11.jpgThe Silicon Valley Business Journal recently reported that Sports Authority has filed for Chapter 11 bankruptcy. The company announced their plans to close almost one third of the stores across the country. According to the plan, over a dozen stores will be closing in California, but all of the Bay Area locations will remain open. Chapter 11 bankruptcy protection gives a business an opportunity to reorganize and emerge stronger and healthier. If you think reorganization might make sense for your company, please contact an experienced San Jose Chapter 11 bankruptcy lawyer to learn more.

The Advantages of Chapter 11 Bankruptcy

  • Automatic stay: When a company files for Chapter 11 bankruptcy, they are granted an automatic stay. The stay provides the business with protection from certain legal claims; including judgments, debt collection efforts and foreclosures. When a company is subject to collection efforts from particularly aggressive creditors, the automatic stay will give valuable, but temporary, breathing room. During this time, a business can work to devise a sustainable reorganization plan.
  • Continued operation: Chapter 11 bankruptcy allows a business to continue operation during the restructuring process. Remember, Chapter 11 is ultimately about reorganization. The ability to continue to operate the business is critical. It will allow the company to keep important brand recognition, community goodwill and their customer base.
  • Restructuring of debt and other obligations: A company might be facing many different financial burdens. For example, some company debt might be subject to excessively high interest rates. Chapter 11 can give the company the opportunity to restructure some of that debt. It might be possible to get a lower interest rate, or at least a different payment plan. During Chapter 11, the company can look for ways to get debt obligations on a sustainable path. Further, if a company is locked into a lease, say on property or rental equipment, the company may be able to get out of that arrangement. Some of those obligations may no longer be economically viable. Chapter 11 bankruptcy allows for some additional flexibility in times of deep financial distress.
  • Control: Finally, chapter 11 allows business owners to retain a significant level of control over their company. Typically, there will be no trustee appointed in a chapter 11 reorganization. The debtor will become a debtor in possession. This allows the owner to retain control over the company during the bankruptcy process. The debtor in possession has many of the same rights, duties and obligations as would a court appointed trustee. But, since the debtor in possession is often from inside of the company, they will be better able to consider the future of the business.

Contact an Experienced San Jose Business Bankruptcy Attorney

If your company is in financial distress, chapter 11 bankruptcy protection might be the right solution. The skilled San Jose bankruptcy lawyers at Diemer, Whitman & Cardosi, LLP have over two decades of experience protecting California businesses and helping them reorganize. Chapter 11 may not be right for every situation, and we can help find the best path forward for your company. Please do not hesitate to contact our office today at 408-971-6270 to schedule a free initial consultation.




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