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California hardware store sells locations as part of Chapter 11

Building a business from the ground up takes a lot guts. The risks associated with such an undertaking are enormous, but the rewards can be just as great. While many businesses succeed, several others succumb to the harsh realities of a struggling economy and a lack of product or service demand. When this happens and a business is drowning in debt and the owner suffers from finance-related stress, legal action may be able to help.

One California business took this step in June. At that time, Orchard Supply Hardware filed for Chapter 11 bankruptcy to shelter itself from its enormous debts. Since that time, the company has sought to sell some of its stores. The company proposed to sell at least 60 locations to big-box retailer Lowe's, but had to await other bid's to see if a higher purchase amount could be reached. No other bids came in and now Lowe's $205 million purchase of Orchard's 72 stores will head to a bankruptcy judge for approval. In addition to paying cash for the Orchard stores, Lowe's has agreed to assume debts owed to most of Orchard's suppliers.

Many business owners fear filing for Chapter 11. But bankruptcy can give business owners the debt relief they need in order to get their business in financial order and to reach a fresh start. When Chapter 11 bankruptcy is filed, the business will be under constant court supervision when it comes to finances. Monthly operating reports, fees, and close scrutiny of company expenditures will become commonplace. However, since there is no time limit on a Chapter 11 bankruptcy, the business can take its time developing a new plan to reach financial health. In the Orchard Supply case, the answer may be to sell store locations.

Filing for bankruptcy is complicated and there are many options available to struggling business owners. An experienced bankruptcy attorney can help a business owner develop a plan that will enable him to relieve his financial burdens while retaining his business. With the proper plan in place, the business owner can continue to operate with hope that his business will be the success he always planned it to become.

Source: The Wall Street Journal, "Lowe's: Orchard Supply Gets No Additional Acquisition Offers," Saabira Chaudhuri, Aug. 12, 2013