When many in Salem hear that a company has declared bankruptcy, they may assume that its operating days are finished. They may have good reason to feel this way; after all, many businesses are never able to completely recover from bankruptcy. However, to automatically assume that a company is just shutting itself down in order to get out from under its debts is missing the point of bankruptcy, especially if it is a Chapter 11 case. The main purpose of this form of bankruptcy protection is to allow a company time to restructure in order to better meet its financial needs going forward, all while avoiding further actions being taken by its creditors.
When a company does emerge from a Chapter 11 bankruptcy, it can be viewed as a bona fide success story. Many were shocked to learn last year that the famed gunmaking company Colt would be filing for Chapter 11 bankruptcy protection. Given that the Colt name has been synonymous with American firearms since the days of the Old West, one might have assumed them to be the last company to be facing financial troubles. Yet sure enough, the company had reported having insufficient funds to pay their creditors. It was reported that they owed over $384 million in debt at the time. Earlier this week, it was announced that the company had trimmed that debt down to $200 million and completed a restructuring that would allow it to continue going forward.
Should a company need the protection that Chapter 11 bankruptcy can provide, such a measure still shouldn’t be seen by both company insiders and outsiders as the end of its run. With the help of an experienced attorney, a company may be able to come out of bankruptcy in an even better state than before.
Source: OutdoorHub “Colt Emerges from Chapter 11 Bankruptcy” Xu, Daniel, Jan. 14, 2016