Our Escondido readers may recall a previous post here from back in December detailing the bankruptcy filing by former video game giant THQ. While the company filed for Chapter 11 bankruptcy, a type of bankruptcy that is usually associated with efforts to reorganize a company, streamline a business focus and come to an agreement on business debt, THQ went into the Chapter 11 process with the intention of selling all of the company's assets. Now, approximately seven months later, it appears that THQ's bankruptcy case has come to a conclusion.
According to reports, the company's liquidation plan was recently approved. A previous auction of the company's asset brought in approximately $72 million, and another sale in April brought in close to $6.55 million more.
In a bankruptcy in which assets are liquidated to pay back debts, whether it is a personal bankruptcy filing or business bankruptcy filing, creditors rarely get the full amount they are owed. In THQ's case, debts owed ranged from $143 million to $184 million, according to estimates. As a result, most of the company's creditors will be doing well to receive even half of what they are owed.
Some companies are able to use Chapter 11 bankruptcy to turn around faulty operations, but others are in no position to do so. In that case, Chapter 7 bankruptcy, which is known as "liquidation" bankruptcy, can be an effective way to settle claims with creditors and close a business. However, business leaders attempting to determine a company's future will probably want to consider the benefits of pursuing a Chapter 11 filing instead. Being able to take a step back from creditors and evaluate the possibility of reforming a company's intent can be the key to revolutionizing the idea of a profitable business.
Source: Polygon, "THQ liquidation plan approved by court, ending bankruptcy case," Michael McWhertor, July 16, 2013