When one hears of businesses seeking bankruptcy protection in Salem, the automatic assumption may be that they are filing under Chapter 11. After all, doing so typically allows them to restructure their businesses in hopes of carrying on after their bankruptcy cases have been discharged. However, if a company is unable to find a restricting agreement that is suitable in assisting in the in repayment of debts and then providing a sound structure in the future, than it may be left with little choice but to crease its operations altogether and file for Chapter 7 protection.
This is the scenario that recently faced a Texas-based energy company. After lengthy deliberations, it was decided that a Chapter 7 bankruptcy was its only option after failing to achieve financing to help cover its three major debt agreements of $89.1 million, $23.3 million, and $10.8 million. The company’s bleak financial outlook was forecast late last month when it was included among a list of the most-distressed companies by the Mergers & Acquisitions News. As a provision of the bankruptcy case, the company’s executive management team has resigned. It is reported that a court-appointed bankruptcy trustee will assume control of the company and oversee the liquidation of its assets in order to satisfy its debts.
While the preference of business owners would no doubt be to keep their companies going, oftentimes their dire financial circumstances will not allow it. In such an event, a Chapter 7 bankruptcy will provide them with protection from further collection efforts and allow them to start anew, possibly in another venture. Any company or private individual seeking such protection may do well to seek the advice of an experienced bankruptcy attorney.
Source: Houston Business Journal “Houston-based energy company files for bankruptcy, ceases operations” Pulsinelli, Olivia, Nov. 10, 2015