Struggling restaurant files for bankruptcy
Realizing a business venture is on the brink of possible failure can be a sobering event. Business owners in this situation often need to make difficult decisions about the future of their companies. Chapter 11 bankruptcy may be an unfortunate, but necessary, option to save a failing business.
One New York restaurant has chosen Chapter 11 bankruptcy. As this option allows businesses to reorganize and restructure debt, the filing could save the struggling New York City soul food eatery. The restaurant has closed and changed locations twice in recent years.
According to an attorney for the restaurant, when the establishment moved to its current location in Greenwich Village, it operated without a liquor license for more than six months. The attorney says the inability to serve alcohol cut into profitability, and the restaurant became mired in debt. According to the restaurant’s commercial bankruptcy filing, the eatery has assets of $50,000 to $100,000 and liabilities of $100,000 to $500,000. The restaurant now has a license to serve alcohol, which the attorney said has been good for business. But that does not mean the restaurant will be able to pay its debts overnight.
Businesses that were once successful may find cash flow limited and become saddled with debt if sales go down for an extended period of time. Chapter 11 bankruptcy allows a company to work with creditors to pay off debt. A business owner may be able to reduce taxes and obtain a payment plan. Though it can be complicated, business bankruptcy may be the best avenue to save a business from going under.
Source: Crainsnewyork.com, “Village hot spot files for bankruptcy,” Lisa Fickenscher, Feb. 5, 2013