American Apparel Struggles to Avoid Bankruptcy

By: Timothy McFarlin | Published: April 25th, 2011 | Category: Bankruptcy, California Small Business

American Apparel is a popular apparel company based in Los Angeles, California. The retail-clothing distributor currently employs approximately 10,000 people globally, 5,000 of which are in Los Angeles. American Apparel operates more than 285 retail stores in 20 countries. They announced last week that in an effort to avoid declaring Chapter 11 bankruptcy, they are scrambling to secure $10 million to pay off their creditors. However, coming up with the funds would not alleviate all of the company’s financial problems.

Sales have fallen 5 percent in the last year, costing the company more than $86 million, and several investors. American Apparel’s stock has fallen by nearly 70 percent to less than $1.

“If the company is not able to timely, successfully or efficiently implement the strategies that the company is pursuing to improve its operating performance and financial position, obtain alternative sources of capital or otherwise meet its liquidity needs, the company may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code,” American Apparel disclosed in its filing statement.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is a “reorganization” and is used for businesses large or small. Corporations and partnerships that are in the midst of an irreparable financial crisis, could be eligible for Chapter11 bankruptcy, as well as individuals who have a large amount of debt, but do not meet the strict asset/debt limitations of Chapter 13 bankruptcy.

Businesses Bankruptcy Statistics

American Apparel isn’t the only business on the verge of bankruptcy. In this economical crunch, many business owners all over the country are declaring bankruptcy. In the 2010, 58,322 businesses filed bankruptcy in the United States. So, if you are a business owner and you are struggling to pay your bills, or you are being harassed by creditors, you certainly aren’t alone.

The Effect of Bankruptcy on Your Business

Frequently in Chapter 11 bankruptcies, you will be able to remain in possession of your assets. In most cases, you can also continue to operate your business under the supervision of the court. Although, there are many benefits to filing for Chapter 11 bankruptcy, these types of bankruptcies are usually expensive and rather complex. This is why you need a bankruptcy attorney with a proven track record of success.

The Decision to File Chapter 11 Business Bankruptcy

Filing bankruptcy for your business is not the end of the world, and it is definitely not the end of your career in the business world. With the proper advice and information, you will be able to reestablish your business, or start a new one, and become even more profitable than before. A great example of that is General Motors who emerged from Chapter 11 bankruptcy and is now more profitable than ever. At McFarlin LLP, we offer free consultations. So, if you aren’t sure whether filing for bankruptcy is the right decision for your business contact us.

Let Us Help You with Your Business Bankruptcy

It is crucial to have an experienced bankruptcy attorney handle your Chapter 11 bankruptcy. At McFarlin LLP, we have handled many business bankruptcies with favorable results. Filing Chapter 11 bankruptcy isn’t something that you want to do yourself. There are many ins and outs to bankruptcy law, and if you are a business owner, it is even more complicated. Let our knowledgeable lawyers and friendly staff assist you with your business bankruptcy. Give us a call at 1-888-728-0044 for a free initial consultation.

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