Bankruptcy is a case in which a business is unable to pay its creditors or is unable to service is debt, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11.
In Chapter 7, the business ceases operations, an individual person or member of a board given powers of administration of property of the business sells of all the assets of the business and then distributes the proceeds to its creditors. If some amount is left over after the distribution the owners of the business receive that amount.
In the case of chapter 11 bankruptcy the person whose dept is to be paid becomes the person in charge of the business that is meant to pay the persons debt.
Unlike in the case of chapter 7 bankruptcy where the business shuts down and the assets of the business are sold to be able to pay the debt of the people the business owes; hence the option of chapter 11 is more preferred by businesses. Leading to the statement Beloved Retailer Headed for Chapter 11
In such case the person now in power, the person to whom the debt was supposed to be paid, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money under the name of the original owner of the business.
When a company begins to falter, especially a retailer dependent on having merchandise to sell, they give vendors late payments or none at all. This ultimately leads to them going bankrupt.
If the vendors detect this before hand this becomes a big problem for retailers, and this speeds up the death clock for the retailer. As the suppliers start depending money on time which the business is unable to pay.
Challenges and Factors for Beloved Retailer Headed for Chapter 11
There are many reasons for why Beloved Retailers are headed for chapter 11. Some of these challenges, factors and reasons are listed below.
First and a very main reason can be Economic Trends. Economic trends mean when the market, the people who purchase goods, change their way of spending money.
Such as in 2008 when everyone decided to tighten their budgets to only buying basic needs and gave up on any purchase other than that.
Such market trends could be due to many reasons such as inflation, when basic needs are so expensive that the customer is left with nothing to spend on other things. Or it could just be some social media trend people take seriously.
Another reason can be Competition and its pressure on retailers. If there is a competition for a seller in the thought of getting, attracting more customers the retailer cuts down its sale price hence cutting down its profit margin compared to the competition in attempt to get more customers.
Such a case leads to less profits and retailers not being able to pay off the amounts they owe to others and when that happens, we can ultimately say that beloved retailers are headed for chapter 11.
External crisis events can also play a very large part in the problem of beloved retailers are headed for chapter 11.
Crisis Events includes Natural disaster or pandemics. In the recent times COVID-19 is the greatest example taking in note todays market.
In the era of COVID-19 online shopping became the major trend and old-fashioned retailers were forced to shut down their businesses or fall under chapter 11. Under complete lock down the retailers were unable to pay off their debts to the ones they owed amounts.
COVID-19 can also be listed under the heading of economical trends, as customers now preferred what was there on the digital market, leading to the downfall of retailers who were mostly in person sellers.
Different Outcomes of the downfall of Retailers
Bankruptcy does not only affect the owners but it affects everyone related to the company in any way such as; employees, shareholders, suppliers and customers.
The case of Beloved retailers headed to chapter, after the owner mainly effects the employees under that company, as they are under the treat of losing their jobs and if they plan to continue their job there is a cut in their pays as a plan to restructure the business by the owner.
Secondly, the suppliers face delays in their payments or partial payments for their goods and in some cases no payment at all.
Bankruptcy from the side of the beloved retailers could also result in the renegotiation of terms and a major risk of loss as your goods are being taken but you do not receive the respective payment.
From the side of shareholders, they might face major loss but however on the other hand if planned right the shareholder can get major profits if the company manages to recover properly.
Lastly, for the customer they may face changes in the pricing of the goods they purchase and they also might lose the perks of their gift cards as they might be discontinued by the business taking in note their current position.
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Why potential Bankruptcy is noteworthy
The going bankrupt of a company also effects the local market area it is in. For example, a store is the only store that provides a specific good that every person of the community uses, they ending of the good or the change in its price deeply effects the community.
Moreover, the locals that have jobs somehow related to the business lose their job which becomes a reason for less or no source of income for the families which creates a havoc in the community and destroys the balance that was one maintained.
Conclusion
The case of beloved retailers headed for chapter 11 can be caused by many reasons such as Economic Trends, Competition and Pressure and External problem such as Crisis Events. This not only effects the owner but everyone that is somehow connected to the retailer, like shareholders, customers, suppliers and etc. This also effects the community and its people deeply.
Beloved Retailer Headed for Chapter 11 is a nice way to restart your business but it deeply effects everything for some time period so, should Beloved Retailers be headed for chapter 11?
