Retailer Loehmann’s Files for Bankruptcy for the Third Time

01/17/2014

bankruptcy lawyer Ft. LauderdaleNew York-based discount retailer Loehmann’s filed Chapter 11 bankruptcy for the third time in its corporate history, this time planning to liquidate its business. The discount chain originally filed for Chapter 11 reorganization in 1999, closing 25 stores and emerging in 2000. It filed again in 2010 due to overwhelming debt and emerged in 2011.

Loehmann’s has 39 stores and an online outlet, but contends that limited access to capital and increased competition in the discount world has forced them to shut their doors. The retailer will be liquidating assets in an auction. Stores and the online portion of their business will continue to operate normally until the auction is concluded in late January 2014. Three capital groups that have all handled other retail liquidations plan to make an initial bid of $19 million for Loehmann’s assets.

In Chapter 11 bankruptcy, debt may be consolidated or renegotiated and put into a payment plan so that the business can continue operations while taking care of debt. So why is Loehmann’s going out of business? The company has declared bankruptcy twice in the past decade, which means they are having a hard time staying competitive while remaining profitable, and the current leadership may have decided that staying profitable is just not a reality anymore. By choosing Chapter 11 bankruptcy, they can continue to operate as they get rid of debt and shut down their stores, making as much money as they can during the reorganization. Then, once they have paid off debt and finished that process, they can sell their assets at auction.

The difference between Chapter 11 and Chapter 7 bankruptcy is that if they had filed Chapter 7, the courts would have liquidated their assets for them, and there would have been nothing remaining of the business to sell at auction for profit. So even though Loehmann’s is closing either way, Chapter 11 allows them to make the most of their last retail days and an opportunity to make a final profit.

Please keep in mind that every case is different, so if you are thinking of filing bankruptcy, and would like to schedule a no-cost consultation, please contact our office by completing the form on this website, calling us at 954-920-5355, or emailing us at info@lslawfirm.net.

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Attorney Advertising. © Copyright 2017 Leiderman Shelomith. All rights reserved. Please keep in mind that every case is different, so if you are thinking of filing bankruptcy,
and would like to schedule a no-cost consultation, please contact our office by completing the form on this website,
calling us at 954-920-5355, or e-mailing us at info@lslawfirm.net.