Overview
The US government has the mandate of protecting all the citizens and residents in their day to day commitments. Through the tax collected, the government gives the Americans various benefits such as security and roads. In this line argument, did you know that you are legally protected should you be unable to pay the amount you owe others? In short, should the unexpected happen to you or your business, the law gives you redress, and you can seek help on your predicament.
Chapter 11 is an option of bankruptcy where a business owner is given an option to re-organize the debts. The debtor is given a fresh start to make an audit of all the current debts, and re-organize them. In other words, it is a phased out payment plan of the outstanding bills, and seeking an amicable solution to the problem, the problem here being the inability to pay.
Like any other business, a pet store business could land into financial trouble. In such a case, then, the best thing is to file for chapter 11. Most of the American pet stores are either medium or small businesses. Some years ago, very few companies would enjoy the benefits that come with chapter 11. Today, many types of businesses in financial trouble could file for chapter 11. In short, if you own a pet store, do not shy away from exploiting the legal opportunities that are available in the US, and you will surely be assisted.
Having stated that, it is important that you understand what bankruptcy is, your eligibility, and how it can benefit you. It is also important that you understand when not to use bankruptcy, and the consequences of using bankruptcy.
Signs You Should File for Bankruptcy
Unfortunately, your personal life could easily affect your business. For example, when you find that you are lagging behind on your mortgage obligations, then your business commitments might be lagging behind too. In such a case then, you could consider having an option on the table to file for bankruptcy. If you are receiving a lot of calls, and you are bombarded with calls from the creditors, then it is time you filed for bankruptcy.
The pet industry carries inherent challenges. The brick and mortar pet stores are facing competition from online platforms who benefit from economies of scale, and a solid client base. Such retailers may not be able to withstand competition from big retailers. In such a harsh environment, the brick and mortar store can easily be pushed out of business.
There have been instances where a pet store has been attacked by a certain disease. The problem with such a disease is that it spreads out to other birds. In such a case, then, you could find yourself losing the entire stock, quite a shocking encounter.
There have been instances where a buyer has sued the pet store. The American society is a highly litigant society. Again, consumer protection is very strong at the expense of the merchandiser. In such a case then, you could face the harsh reality of a lawsuit which could drain your financial resources.
Have a look at the following scenario. You are at your workplace on a bright Monday morning serving your clients. A customer comes to you seeking for recommendation for a pet cat. The customer specifies that she has her parents at home who are aging. You give him the best advice and the best product. According to you, you did everything right, and you sold the product to him.
As you are enjoying the fruits of your hard work, you receive a call that your buyer is taking you to court. You take it as a joke, but the buyer informs you that the cat you sold to him is not only lethargic, but also stumbling when it is walking. The case is complicated by the fact that the buyer says that the cat is not just a cat but he was preparing it to be a member of the family.
The only consolation is that the buyer is taking you to a small claims court and not any type of court. Imagine the losses you would incur if you faced such multiple lawsuits facing your business? When pet stores are facing such challenges, the most prudent thing is to file for chapter 11 bankruptcy by hiring a Chapter 11 Bankruptcy Consultant.
Benefits of Filing for Bankruptcy
The most important benefit of filing for bankruptcy is that you are able to have a peace of mind. Upon filing for bankruptcy, bill collectors are served with an automatic stay. In this case, most of the civil suits which could be initiated against you cannot be filed. In addition to that, you will have an opportunity to have a concrete negotiation with the creditors on how to solve your problem.
Through filing for bankruptcy, you re-organise yourself on the best way forward, and you have time for the same. You are no longer bombarded with calls, and therefore, you are able to think in a coherent manner.
Being bombarded with calls can be very stressing to your life. This is when you are told to pay, and you do not have the money to do the same. In addition to that, debt collectors are not known to have empathy and sympathy, and this can have adverse effects on your health. Through such difficult conditions, the solution is chapter 11.
Consequences of Filing for Bankruptcy
It is true that filing for bankruptcy could ease your current problems and you are going to have a peace of mind. However, by choosing to file for bankruptcy, you could be inviting a long-term problem. Filing for bankruptcy will haunt your good credit standing. In other words, you could have a permanently damaged credit score.
Consequently, it is going to be very difficult for you to secure future business opportunities. As a matter of fact, if your records show that you filed for bankruptcy, then there are jobs that you cannot take. In addition to that, the amount that you pay for insurance could be higher. In short, filing for bankruptcy could be cheaper in the short run, and more expensive in the long run.
When it comes to pitching your business ideas, potential investors will not take the information you give at the face-value. Rather, they are going to do a background check on your past business interactions, major achievements, and major flaws. Investors make very careful decisions, and they want the money they invest to carry minimal risk.
Therefore, prior to filing for bankruptcy, evaluate if all the options have been exhausted. For instance, you could check with the creditors to see if they are willing to have a negotiation with you on the best way forward. If they agree, then propose a sustainable way of paying off the debts without over-promising them.
Filing chapter 11 does not mean that one is out of the woods yet, though it could be a temporary relief. When one is given an opportunity to do re-organization of the debt, it is done with the interest of the creditors and not necessary the debtor. Therefore, even after you file for chapter 11, you must be willing to take instructions on how to run the business. This could compromise your flexibility and will in doing what you think is best for your business.
When you file for chapter 11, your business can continue as usual after all. In that case, you are going to be known as the debtor in possession. However, when it comes to major decisions, one needs the permission of the courts. These include terminating a rental agreement, disposal of assets, and expanding the operations of the business. From then on, until you clear your debts, there is going to be a lot of over-sight from the court.
In the case you are filing for bankruptcy after threats from disconnection of certain services, electricity for instance, then you are going to enjoy some temporary relief as you decide on what to do next. However, this is only temporary, and you need to seek a permanent solution.
When you are threatened from eviction from the store, the eviction notice is going to save you, but only for a short-time. The landlord may make a decision to go ahead with the eviction, just like you have not filed for bankruptcy. In some cases, the court may be requested to life the automatic stay, and if justifiable reasons are given, it will do so.
As a business owner, you could be worried about the reputation of your business. If you are associated with bankruptcy, then you are not going to retain your loyal clients. In addition to that, other parties are not going to have long term commitments with you. In the end, this is not going to be good for your business as you could lose a significant number of clients that you would have otherwise retained.
Again, if you filed for chapter 11 after making unethical mistakes that contributed to the fall of your business, then you are not going to retain the independence of your business. Such reasons include utter incompetence, dishonesty, and fraud. In such a case, then, the court is going to appoint a trustee, and there, you will be losing control of your business. If you did a criminal activity, for instance, writing a bad check, and you are fine, you have to pay the fine whether you file for bankruptcy or not.
From that analysis, filing for bankruptcy is not for everyone. It should entail a careful consideration of the factors in question, against the potential drawbacks. If it can be avoided, the better it is. However, if one is not in a position to avoid it, then filing one will have far-reaching implications on giving one an opportunity to turn things around.
Notable Case
Petlands Discounts, a chain that has operated for a long time in New Jersey, Connecticut, and New York, filed for bankruptcy. This was after Neil Padron died. Prior to his death, Padron has been operating the business since 1965. Prior to his death, the family had admitted that there was a probability that the business could file for bankruptcy. At the height of its success, the company operated almost 120 stores. The closing of the stores led to losses of jobs across the three states. New York State Department says that the state would lose 367 jobs.
When Petlands Discounts had colonized the American market, there were very few online stores dealing with pet stores. The family faced the threat of the coming of online platforms, chewy and Amazon for instance. The online platforms offer cheaper pet products, and thereby, the other businesses are pushed out of business. As more and more consumers seek online solutions, businesses such as Petlands Discounts are left to fight to survive.
The fall of the company is a testimony to the immense challenges facing the American business landscape. In addition to that, it shows that many American businesses have no option but to file for bankruptcy when they are faced with such a situation. In many cases, circumstances push businesses to the point of filing bankruptcy, and therein jobs and the sovereignty are all lost, not mentioning the suppliers who are going to lose their source of income.
Conclusion
Business owners should understand that there are legal avenues which can protect them when their businesses are in economic turbulence. However, as far as possible, filing for bankruptcy should be avoided as far as possible. What matters most is to ensure one employs the right financial behavior in order to prevent a situation of filing for bankruptcy.
Running a pet store does not mean that one is immune to the various challenges facing businesses. Chapter 11 is available for most of the Americans, and if one needs one through justifiable reasons, there is no reason why one should not consider one.