Attorney Ed WoodsCNN Money recently reported on the continuing challenges facing retail stores. According to the article, more than 300 retailers have filed for bankruptcy this year. This represents a 31% increase over last year. And while many of these bankruptcy filings are small local retailers, there are some big names on the list. Some of the larger retailers include Gymboree (children’s clothing), rue21 (teen’s clothing), Payless ShoeSource (discount shoes), Gander Mountain (hunting/outdoor retailer), RadioShack (for the second time since 2015), HH Gregg (appliances, electronics and furniture), Wet Seal (teen’s clothing and second time since 2015), and The Limited (women’s clothing).

Filing Chapter 11 Bankruptcy

Not all of these retailers are soon to be only a memory. Some are seeking relief under Chapter 11 of the Bankruptcy Code. This form of bankruptcy is geared towards keeping these retailers in business while allowing them to restructure their debt obligations. Still, the impact on these businesses will be significant. Gymboree may be closing 375 of its 1,300 stores. Payless is expected to close 400 of its 4,400 stores worldwide. Rue21 is expected to close about 400 of its stores.

Sadly, some of these retailers will likely go away for good. Gander Mountain is in the process of liquidating all of its assets. RadioShack attempted through the 2015 bankruptcy to stay alive by teaming up with Sprint operating in their stores. But, it seems probable that RadioShack will soon be a thing of the past. HH Gregg closed all of its 132 stores. Wet Seal closed 171 stores and 1,750 employees lost their jobs. And The Limited, a once very popular retailer, has closed all of its remaining stores.

What is Happening?

You can probably guess and if you guessed online shopping, you guessed correctly. As technology has advanced, it has become much easier to browse online, find exactly what you want, pay for it online, and have it come right to your front door.

All of these retailers are facing a financial crisis not unlike the financial crisis individuals face when income is outpaced by debts and expenses. While Chapter 11 is frequently used by businesses to restructure their financial affairs and stay afloat, Chapter 13 can be utilized by individuals to accomplish the same goals. Chapter 11 allows businesses, in many instances, to pay what they can while continuing in business. It also offers these businesses protection from creditors who might otherwise be able to pressure them so much that they may have no choice but to go out of business. Chapter 13 affords the same protection to individuals while they reorganize and pay what they can afford to pay.

On the other hand, some of the retailers are facing such grave financial situations that they cannot stay afloat and must liquidate and go out of business for good. Chapter 7 bankruptcy is the vehicle that gets this job done. It provides an orderly way to sell off all the assets and treat the creditors fairly as the pie is being divided.

For individuals, Chapter 7 provides means to a fresh start free of the stress and pressures of debt the individual cannot possibly pay. In these circumstances, it doesn’t really matter much at all why the individual is overwhelmed by debt. It could be due to a divorce, a medical illness, or a change in job status. Or it could be a combination of all these or other factors. The important thing to remember is that, just like a business venture that runs into hard times, help for individuals overwhelmed by debt is available.

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