Sometimes a business can get into a terrible financial mess, with debts it can't control, but all it needs is a little help. Chapter 11 is a way for a business to get its debt under control and reorganize to get into better financial shape.
Recently, the delivery service FTD filed for Chapter 11 bankruptcy protection. Founded in 1910, FTD was among the largest floral delivery services in the nation for generations, and expanded into other delivery services as well. However, the company says it is suffering from the effects of increased competition, especially from delivery giant Amazon.
FTD borrowed about $200 million five years ago to buy ProFlowers, one of its main rivals, but Amazon has made gains into the delivery business since then, making it hard for FTD to pay back its debt. FTD says it will sell its North American and Latin American floral businesses, as well as its subsidiaries Shari's Berries and Personal Creations. FTD has about 870 employees worldwide.
When a company files for Chapter 11, it puts an immediate stop to debt collection efforts from creditors while the company develops a reorganization plan to return to profitability. Some companies return to form by cutting costs or closing unprofitable divisions. Others sell off part or all of their business.
Going through Chapter 11 or other debt relief measures is not easy for business leaders who are usually focused on growth, but it can be the best way to revitalize a struggling business. With the help of a skilled debt relief attorney, business leaders can get debt under control and return their companies to financial health.