Shopping Mall Bankruptcy
Insolvent Businesses and Bankruptcy Auctions
When a business becomes insolvent, it’s unlikely that a bankruptcy court will approve a Chapter 11 reorganization. To be sure, it’s pretty difficult for such a business to prove that it might be able to repay any debts. And that’s exactly what happened recently in Plantation, Florida.
According to a recent article in the South Florida Business Journal, a U.S. bankruptcy judge “rejected the attempt of a Chinese company to retain control of the shuttered Fashion Mall in Plantation and scheduled the property for auction.” A number of potential bidders already have come forward to tour and to inspect the property. The debtor trustee expects the property to sell for more than $24 million.
What options did the business owners have? Reports indicate that U.S. Capital/Fashion Mall, along with its parent company Mapuche LLC, filed for Chapter 7 bankruptcy back in October of 2014. The minority owner and manager of the mall, Wei Chen, made the decision to file for a liquidation.
Chapter 11 Reorganization Complications
However, the bankruptcy filing got a little bit tricky, given that Wei Chen was currently being sued by a China-based company, Ganglu Iron & Steel for misuse of funds. Ganglu opposed the Chapter 7 liquidation, and it attempted to “convert the case into a Chapter 11 reorganization,” which it planned to handle without Wei Chen. Ganglu filed a motion for the Chapter 11 reorganization, and it stated a plan to “find a U.S. partner.” Ganglu even “deposited $10 million to show it was serious about funding the project.”
Yet U.S. Bankruptcy Judge John Olson “ruled that a Chapter 7 auction was the best way to go.” Why wouldn’t the court allow a Chapter 11 reorganization? When a business has become insolvent, it’s extremely difficult to imagine a path along which the business could reorganize its debts and repay its creditors. Indeed, the bankruptcy judge in this case emphasized that, in the case of the Fashion Mall, “conversion to Chapter 11 would have brought significant risk and delay.” As such, the bankruptcy judge determined that “the correct approach is to proceed with the sales procedure” connected to the Chapter 7 bankruptcy filing.
Bankruptcy Options for Businesses
When a business makes the decision to file for bankruptcy, what kinds of options are available? Many consumers know that, if they decide to file for personal bankruptcy, they typically have two different options: Chapter 7 bankruptcy and Chapter 13 bankruptcy. While Chapter 7 bankruptcy results in liquidation and a “clean slate,” so to speak, a Chapter 13 bankruptcy allows for you to make payments through a debt repayment plan.
Similar to consumer bankruptcy, business owners have multiple options. Depending on the size of your business, the following types of bankruptcy may be available options:
– Chapter 11 bankruptcy: this type of bankruptcy usually is reserved for larger businesses, or those with substantial assets (and debts). Under this type of bankruptcy, debts can be “reorganized” so that the business can pay their creditors while allowing the business to continue operating.
– Chapter 13 bankruptcy: this type of bankruptcy provides a repayment plan, just as it does for individuals who file.
– Chapter 7 bankruptcy: this type of bankruptcy is usually best for insolvent businesses that cannot repay any amount of their debts. It often involves liquidation, and can involve the auction of the business property.
If you have questions or concerns about bankruptcy for business owners, don’t hesitate to contact an experienced Tampa bankruptcy lawyer. The attorneys at Samantha L. Dammer can speak with you today.