What Does Chapter 11 Bankruptcy Mean & What Will Happen To Revlon In The Process?
It’s no secret that COVID-19 has ravaged several industries. And with an emphasis on staying home, as well as supply chain issues, the cosmetics industry has seen some hard times as well. Even giants in the industry weren’t immune from the economic effects of COVID-19. On June 16, 2022, one of the top names in the business, Revlon, filed bankruptcy. The 90-year-old company filed its petition in the Southern District of New York. It is a Chapter 11 bankruptcy, so it will restructure the company as opposed to it shutting down for good. Don’t expect Revlon products to be disappearing from store shelves any time soon.
What Went Wrong For Revlon
Revlon used to be known for its bright red lipsticks, but not all customers stayed loyal when the company introduced more muted shades to follow trends. It used to be considered the #2 selling cosmetics company, but now is ranked 22nd. Now the cosmetics market is flooded, especially when it comes to lipsticks, and other competitors have simply been more successful at selling them. This created debt for the company before the pandemic even began.
Revlon’s sales dropped by 21% in 2020, or when the COVID-19 pandemic started. Many people lost their jobs, leaving makeup low on shopping list priorities. Many people also began to work from home, eliminating the need for makeup most days. Sales have slowly caught up but never quite returned to pre-pandemic levels.
Revlon has also been facing issues with the supply chain due to the pandemic. This all eventually grew to be too much, leading the company to file bankruptcy. On its petition, Revlon listed between $1 billion and $10 billion in assets and liabilities. The company announced that it plans to receive $575 million in funding from its existing lenders to keep the company afloat as part of the bankruptcy.
More Information About Chapter 11 Bankruptcy
Chapter 11 bankruptcy is far less common than Chapter 7 and Chapter 13 bankruptcy because it is more complex, and therefore more expensive. It can be used by both individuals and businesses, and is unique in that it allows a business to continue running. Just like with Chapter 7 and Chapter 13, there is a court-appointed attorney known as a trustee assigned to the case. However, in a Chapter 11 bankruptcy, the debtor’s top creditors will assemble a committee. The debtor must come up with a plan to restructure their debt and submit it to the creditor committee. If the committee doesn’t approve, they can create their own proposal for debt restructuring. Once the debtor and the committee come to an agreement, the court will approve the plan and it will be placed into action.
When in an active bankruptcy, a person or business is protected from their creditors. This can potentially be a long time in a Chapter 11 bankruptcy. However, the debtor will be restricted in actions they can take financially while under these protections. For example, if the debtor is a business, the committee will have decision-making authority over things like opening and closing locations, selling shares and equipment, new initiatives, and more.
Can Bankruptcy Help Me If I Have My Own Small Business?
Chances are, if you’re reading this article, you don’t own a company as massive as Revlon. Filing a traditional Chapter 11 bankruptcy probably isn’t the most efficient way to deal with debt, whether it’s personal or business. Chapter 13 bankruptcy is only available to individuals and sole proprietorships, so it might not be a feasible option depending on what type of small business you own. Chapter 7 bankruptcy can be used by a wider variety of companies. This includes partnerships and corporations like LLCs, or limited liability companies.
The downside of filing Chapter 7 bankruptcy when you own a business is that it must close. Depending on your plans and the type of business you won, this may or may not be a big deal. Maybe you’re ready to retire, or have decided owning your business simply isn’t for you anymore. Chapter 7 can be an efficient way to tie up all the loose ends and move on with your life. Or maybe your company doesn’t have expensive machinery and equipment. Your business supplies might be exempt, and you can simply open up a similar business under a different name. A Chapter 7 bankruptcy takes 3 to 6 months to complete, and will eliminate your personal unsecured debt as well. Common examples include credit cards, medical bills, unpaid utility bills, personal loans, and more. You must meet certain income restrictions to qualify, and only certain assets will be exempt in a Chapter 7 bankruptcy. You should speak with a bankruptcy attorney in your area to confirm that you are eligible to file Chapter 7. For more information about Chapter 7 bankruptcy, fill out our online form to schedule your free consultation with one of our experienced bankruptcy lawyers.
If Chapter 7 bankruptcy doesn’t work with your business situation, you might want to consider using Subchapter V for Chapter 11 bankruptcy cases. These are small business provisions that can make Chapter 11 bankruptcy more attainable for business owners that aren’t corporate giants. To qualify for a small business Chapter 11, you must owe less than $3,024,725 to creditors other than insiders. There is no creditor committee in a small business Chapter 11 bankruptcy, which significantly reduces legal fees for the debtor. However, a small business Chapter 11 debtor must submit more business paperwork than a standard Chapter 11 bankruptcy debtor. The trustee is required to pay more attention to a small business Chapter 11 bankruptcy as well, since the creditors don’t have such detailed insight into how the debt will be restructured. The case will also be subject to a 300-day deadline. You should be prepared for extensive legal work and potentially needing to hire outside assistance like accountants and investment firms.
How Our Bankruptcy Team Can Help You Discharge Debts with Chapter 7 When You Own a Small Business
If you have a sole proprietorship or a small business, our bankruptcy team can put our experience to work for you. Bankruptcy is generally more complex as a business owner, so a lawyer can work to protect your assets and make your filing more straightforward. Working with a lawyer ensures that you can enjoy all the benefits of bankruptcy without unexpected penalties. We will promptly address any issues that could put your bankruptcy protections and assets at risk. And we offer all of this at rates that you can probably afford.
Arizona Bankruptcy Lawyers is proud to offer high quality services with competitive pricing and payment options. We understand how difficult it can be to pay all your legal fees up front, as many local bankruptcy attorneys require before your case can be filed. That’s why we offer flexible up front fees with post-filing payment plans- you may even qualify to file your case for $0 down! Your plan includes a 0% interest rate and credit reporting, which can help increase your credit score after bankruptcy. Your initial consultation is totally confidential and free of charge. Call our office or fill out our online form to get started today.
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