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American Apparel Seeks Chapter 11 Bankruptcy Protection

Posted on in Bankruptcy
American Apparel Seeks Chapter 11 Bankruptcy Protection

American Apparel, the popular brand of American-made casual wear, filed for Chapter 11 bankruptcy in October of 2015. The term “Chapter 11 bankruptcy protection” can be a bit misleading – the company did not file for anything that will protect it from bankruptcy. Rather, it filed for the type of bankruptcy that allows a company to reorganize to hopefully become profitable in the future.

Chapter 11 bankruptcy is a type of bankruptcy generally reserved for companies rather than individuals. In some rare cases, an individual may file for Chapter 11 bankruptcy, but usually an individual can only file Chapter 7 or Chapter 13. Business owners who are struggling with high amounts of debt are not tied to Chapter 11 – in some cases, Chapter 13 is a better choice for a small business owner who needs to reorganize his or her operation to repay debt. If you are struggling with any type of debt and considering filing for bankruptcy, discuss your case with an experienced bankruptcy attorney to determine which chapter is right for you and how to move forward with your plan.

What is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy is meant for companies that intend to continue to operate after filing for bankruptcy. Like Chapter 13, Chapter 11 bankruptcy requires that the bankrupt party develop a repayment plan. Because Chapter 11 is meant for companies, it also requires that the company seeking debt relief create a reorganization plan for the company to avoid going into extreme debt again.

To file for Chapter 11 bankruptcy, a business owner must file a petition with the United States Bankruptcy Court. Once the petition is filed, the company is granted an automatic stay. This is an order that prohibits the company's creditors from making collection attempts. The company must then develop reorganization and repayment plans and submit them to the court for approval. Under the court's supervision, the company then works to repay its debts. Once the plans are confirmed, any debts the company had prior to the confirmation date that were not addressed in the bankruptcy agreement are discharged.

For a company facing financial difficulties, Chapter 11 can be a second opportunity to succeed. For Chapter 11 bankruptcy to be worthwhile, the business owners and shareholders must be willing to make sacrifices and try new strategies to maximize their profits. Reorganization can be difficult, but sometimes it is the only option other than closing.

Illinois Bankruptcy Attorneys

Facing a high amount of debt can be intimidating. For advice tailored to your specific needs, contact our team of experienced Illinois bankruptcy attorneys at the Law Offices of Newland & Newland, LLP. We can explain the differences between the various bankruptcy chapters to you and help you determine which type is best for your case. Do not wait to get started with our firm – the sooner you act, the sooner you can take control of your financial situation and start moving forward on the path to financial independence.

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