Preparation Is Key For a Small Business Bankruptcy Reorganization

Remember George Zimmer’s famous line? “You’re gonna like the way you look. I guarantee it.”  On August 2, 2020, the parent company of Men’s Wearhouse filed for bankruptcy.  The men’s clothier very well may emerge successfully from bankruptcy.  The company gained the support of a majority of its lenders.  The company has obtained financing to get through the case.  The company recognizes that it must compete in a rapidly evolving retail environment.  No doubt, the company has taken other steps to prepare for its bankruptcy reorganization.

What are the prospects of a small business in bankruptcy?  Proper planning and preparation are key to a successful reorganization.  Here are a few considerations for pre-bankruptcy planning:

  • Should the company seek a global, out-of-court workout with its creditors so as to facilitate, or avoid altogether, a bankruptcy filing?
  • What are the consequences if the company does not file a bankruptcy case?
  • Can the business survive if its trade debt is eliminated?  If not, what other changes may be necessary?
  • How will the business stay afloat for the next 60-90 days?
  • Can the company find an investor or competitor that might buy, or buy into, the company if it were sold free and clear of all liens, claims and encumbrances?
  • Would the closure of weak performing store locations, and escaping those leases, help the business to survive and thrive?
  • Which vendors provide goods or services so critical that the company should seek permission from the bankruptcy court to pay them in full?

With careful planning and preparation, a small business can reorganize successfully, at less expense, and with less stress and uncertainty.


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