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Troubled bankruptcy case for Sports Authority hits another snag

Businesses struggling with debt in Salem will often look to a Chapter 11 bankruptcy as their lifelines for getting out from under massive liabilities while still being able to remain in operation. However, simply filing for this form of bankruptcy protection may not guarantee that. A debtor maintains an obligation to present a viable reorganization plan to its creditors in order for this process to work. If it is unable to do so, it could face the potential of having its claim challenged and possibly converted to a Chapter 7, in which remaining open may cease to be an option.

Such has been the case with the sporting goods retailer Sports Authority. The company filed for Chapter 11 back in March hoping to find a potential buyer that would allow it to remain in operation. Yet problems immediately arose when several of its consignment retailers threatened to pull products from its stores. The company has also faced trouble from the property owners of several of its store locations, who claim it is deliberately trying to avoid rent obligations. Faced with these problems, Sports Authority decided to cease operations and liquidate its remaining assets. Now, its unsecured creditors are citing these problems in petition to the court asking that the company’s bankruptcy case be switched to a Chapter 7.

Keeping a company’s doors open in the midst of bankruptcy can be challenging, even for those that do not face issues such as those described in the example above. It is during this time that having a source of sound advice and guidance is vital if business owners hope to meet the demands of creditors looking to get what they can before a case is discharged. A bankruptcy attorney may be a good source of such assistance.

Source: The Wall Street Journal “Sports Authority Creditors Seek to Convert Bankruptcy Case to Chapter 7” Rizzo, Lillian, July 22, 2016

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