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American Apparel Files for Chapter 11 Bankruptcy, Again

chapter-11.jpgIn October of 2015, the Los Angeles-based clothing brand American Apparel filed for Chapter 11 bankruptcy protection. By February 2016, the company had exited bankruptcy and was hopeful for the future. This occurred after the company got its creditors to approve its $230 million reorganization plan. The plan swapped large amounts of debt for equity. Unfortunately, less than a year later, it appears that the restructuring plan was inadequate to meet the financial challenges facing the company. According to Bloomberg news, American Apparel has once again filed for Chapter 11 protection.

The Company Struggled to Execute Its Reorganization Plan

To move forward in the Chapter 11 bankruptcy process, filing companies must be able to get their restructuring plan approved by creditors and/or the bankruptcy court. This is known as getting a plan 'confirmed'. This is often challenging. Getting confirmation can be difficult and the process needs to be handled with care, under the guidance of a qualified Chapter 11 bankruptcy lawyer. However, despite being difficult, it is also just a first step in the restructuring process.

Business bankruptcy filers must be sure that they put forward a plan that their company can actually achieve. Further, their plan must be one that can put their company back on a sustainable financial path. After all, the fundamental purpose of Chapter 11 bankruptcy is to restructure the burdensome obligations facing a business so that it can return to success. Unfortunately, far too many businesses leave Chapter 11 bankruptcy without truly fixing their core problems.

It appears that American Apparel has fallen victim to this common issue. As Bloomberg reported, American Apparel had trouble raising enough capital to carry out its turnaround plan. This put the business into an immediate hole and eventually resulted in the company landing back in bankruptcy court. Now, reports indicate that company is to be sold off to a Canadian t-shirt maker.

Getting a Chapter 11 Reorganization Plan Right the First Time

A Chapter 11 bankruptcy attorney will fight hard to help your company get the best possible reorganization plan confirmed. As the American Apparel cases demonstrates, it is not enough to simply enter and exit bankruptcy. Ultimately, the Chapter 11 process will only be successful if you can get an effective plan confirmed for your business. In many cases, overly-aggressive creditors will try to force your company into a plan that is not in the best interests of your business or in the best interest of the creditors as a whole. You need an attorney by your side who can help you craft a plan that is both consistent with the requirements of the law and that will help create an environment which will allow your business to succeed in the long run.

Do You Need Business Bankruptcy Assistance?

If your business is facing serious financial difficulties, our skilled San Jose Chapter 11 bankruptcy attorneys will review your case and help you determine if bankruptcy is appropriate for your business. To set up a free review of your case, please contact our team today. At Diemer, Whitman & Cardosi, LLP, we represent businesses throughout the Bay Area, including in Santa Clara County, Napa County, and Contra Costa County.





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