Not every business in Tennessee will see financial success, especially those in the cutthroat restaurant industry. For example, the company that owns the restaurants Perkins and Marie Callender, along with Foxtail Foods which supplies baked goods for these chains has filed for bankruptcy, despite a recent increase in sales. The company has $115 million in secured debt, and experienced financial troubles in 2017 and 2018 due to declining sales and rising labor and commodity costs. And although as of June Perkins' sales increased 5.1 percent, it was not enough to prevent the company from filing for bankruptcy, although this stabilization may make restructuring an option.
It may seem like we hear about brick-and-mortar stores filling for business and commercial bankruptcy more often now than ever before. It is important for people in Tennessee to understand the basics of Chapter 11 bankruptcy, which is the type of bankruptcy many of these businesses choose to turn their financial future around.
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.
The saga of the Sears bankruptcy is continuing with another lawsuit against the former chairman, Eddie Lampert, claiming that Lampert and his associates siphoned off billions of dollars in assets from the company and purposely drove it into bankruptcy. Sears stores were scattered across Rockland County and the state of New York, causing many to wonder how the chain could have failed. The plaintiff in the lawsuit, Sears Holdings Corp., is overseeing the liquidation of Sears' assets and is representing the interests of the company's shareholders.
Another discount chain that depends upon brick and mortar stores is beginning the process of closing outlets and selling off its merchandise. The chain is Fred's, a chain based in Memphis.
Small community hospitals all over the United States are facing severe financial pressure to remain solvent. The pressure comes from two sources: the expansion of large medical companies and increasing costs. These factors have forced a small hospital in western Tennessee to go through a forced business bankruptcy under Chapter 11.
Most businesses show signs of financial weakness before they cease operations or declare bankruptcy. Occasionally, a business will close without prior warning to employees or clients and commence a business bankruptcy proceeding. A high-end mental health treatment center in Auburn, near Knoxville, that focused on female clients recently closed its doors with no advance warning to clients or employees.
Few Bradley County businesses enter bankruptcy in a vacuum. A small retailer may have existing supply contracts with expiration dates long after the anticipated bankruptcy filing date. Both retailers and manufacturers may have unexpired real estate or equipment leases. In a Chapter 7 bankruptcy, the debtor may wish to walk away from such obligations, but in a Chapter11 business or commercial bankruptcy proceeding, the debtor may wish to continue a real estate lease or an important supply contract. The Bankruptcy Code uses the legal concept of "executory contract" to handle both problems.
In what seems to be almost a regular weekly occurrence, another well-known retailer announced that it will be closing several stores here. According to a press release issued by the parent company, Twenty Gymboree and Crazy 8 stores in Tennessee will be affected by the company's decision to file a petition for protection under Chapter 11 of the Bankruptcy Act.
The great majority of bankruptcy petitions filed in Bradley County and in Tennessee at large are filed by debtors seeking to have all or a portion of their debt load erased by the bankruptcy court. The rare exception is a petition filed against a person or an entity by three or more creditors asking to have the defendant declared bankrupt and to have the court take charge of the debtor's assets. Such petitions are called involuntary bankruptcies, and they are used by creditors to freeze the assets of an entity who may be mismanaging or wasting its assets.