Filing Again: Understanding Chapter 22 Bankruptcy

If there was such a thing as a unicorn in the U.S. Bankruptcy Code, Chapter 22 would be it, because there’s really no such thing. When a business files for Chapter 11 bankruptcy more than once, they are commonly referred to as filing for Chapter 22.

Radio Shack made the news in 2017 when it filed for Chapter 22. That second Chapter 11 came only two years after it underwent a restructuring in 2015. Instead of opting to continue the business, its owner, General Wireless Operations, chose to liquidate all the remaining retail outlets. Two other recent Chapter 22 cases are clothing retailer Wet Seal, which filed in February 2017 (less than two years after its last Chapter 11) and American Apparel, which restructured but only lasted nine months before filing a second Chapter 11 in November 2017.

Companies experiencing financial difficulties can technically petition for Chapter 11 bankruptcy as often as they choose. Unlike an individual debtor who has to wait for a discharge from Chapter 7 or 13, there is no waiting period to file again unless the company intends to close down its business and liquidate its assets after the plan is confirmed.

Why File Twice?

Chapter 22 gives a business more than one chance to get back on its feet. With the first Chapter 11 filing, it streamlines operations and creates new debts that it will strive to meet going forward, while the old ones are often adjusted or reduced. If the company does not rally enough to meet these new obligations, they can file a second Chapter 11 and reduce the debt even more, although some businesses opt to call it a day and use the second filing to carry out a systematic liquidation.

Contact an Oklahoma Bankruptcy Attorney

Whether you’re a company owner facing your first Chapter 11 or you are considering Chapter “22,” it is important to speak with an experienced bankruptcy attorney to understand your options and what you can expect. Attorney B. David Sisson is a board-certified bankruptcy attorney who will give you honest and accurate advice for your company’s circumstances. For more information, please contact the Law Offices of B. David Sisson today.

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