Perfumania to Shutter Stores in Chapter 11 Bankruptcy

Perfumania, a staple of American malls, has announced that it will be closing 64 stores and filing for bankruptcy. The company is known for its discounted prices on high-end perfume brands, such as Burberry and Dolce & Gabbana. 162 of its stores will remain open as the company attempts to restructure its debts and avoid becoming obsolete.

As e-commerce slowly eats away at brick-and-mortar businesses, Perfumania hopes to avoid what has happened to so many other retail businesses.

What Is Chapter 11 Bankruptcy and How Can It Save My Business?

The main goal of a Chapter 11 bankruptcy is to preserve a business because long-term revenues will be worth more than the value of liquidating the business. Through Chapter 11 bankruptcy, a business owner can restructure finances through a court-approved bankruptcy plan. It helps the business owner reduce obligations and modify payment terms and can also allow debtors to sell off certain assets to pay off debts or to downsize a business as necessary for continued operations.

To declare Chapter 11, a business must disclose all assets and make a list of the debts that it is seeking protection from. This step can be complex, especially when a company is worth millions of dollars or more. Businesses under Chapter 11 also cannot make sales or purchases that are outside of standard business operations.

Businesses, if possible, tend to file for either Chapters 7 or 13 to avoid some of the major risks associated with Chapter 11. However, if you seek to preserve your business long-term instead of liquidating your assets, Chapter 11 may be the right choice for you. Before you make any major decisions regarding the future of your company, you should discuss your options with a bankruptcy lawyer.