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Toys R Us Files Chapter 11 Bankruptcy

Following on from the news that Toys R Us filed Chapter 11 Bankruptcy  in September, we thought we’d explain more about why a company would file for Chapter 11 Bankruptcy, and how it compares a person filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.

Business bankruptcies and personal bankruptcies have two basic similarities:

1.  Businesses and people look into bankruptcy because they aren’t making enough money to pay all of their bills

2. After bankruptcy, both people and companies keep the assets that they need to make a living, but lose the Debt which had become unbearable

 Filing bankruptcy eliminates lots of debt and gives you some breathing room to reorganize.

Why do companies file for Chapter 11 Bankruptcy?

In the corporate Chapter 11 context, it allows companies to push back payments on debt and suppliers, and restructure some long term contracts like:

  • Lease agreements
  • Health care plans
  • Pensions

If a company has to make fewer debt payments every month, then it can afford to produce a higher quality product, and will make more money.

Getting rid of bad business deals or debts allows the company to use its resources on what it’s good at.

In the example of Toys R Us, it would allow them to:

Get rid of the stores that are not performing well without paying years of rent and penalties to the landlords, and reinvest that money into making the profitable stores better.

For example, they can:

  • Buy the season’s most popular toys
  • Stock up their inventory for the holidays
  • Invest a bit in renovating their stores
  • Improve their software or marketing

Why do people file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy?

When it comes to ordinary people, filing bankruptcy also gives them some breathing room in their budget.

Lots of people are trying to pay off student loans at the same time as they are struggling with a high car payment or judgments or wage garnishments.

Personal bankruptcy means that you can immediately stop paying:

  • Credit cards
  • Medical bills
  • Most court judgments

If you have a bad deal on a car loan, then it also tends to allow you to get a better deal on a car afterwards without rolling the debt from your old car into the new car as part of the trade in process.

I have worked with lots of clients who have been struggling at work due to the stress of garnishment or living paycheck to paycheck, and I helped them get back on track by filing personal bankruptcy.

Just as Chapter 11 will give Toys R Us some breathing room to get rid of the bad debt and focus on the good parts of their business, bankruptcy allows ordinary people to get rid of bad debt so they can focus on family and career.

Bankruptcy also lets you keep:

  • Your car
  • Your house
  • Your personal effects
  • Your retirement accounts

So you have everything you need for a fresh start.

Most of my clients get to keep all of their property and money when they file bankruptcy.

Will suppliers continue to work with Toys R Us?

Another parallel between business and personal bankruptcies is that most companies will continue to do business with the company or person after the bankruptcy.


Think about it, will the toy manufacturers suddenly stop selling toys to Toys R Us because of the bankruptcy?

No! That would be ridiculous.

Toys R Us is a good partner for all of the toy manufacturers and brings them lots of sales.

They will keep working with Toys R Us, even if a few invoices for certain shipments don’t get paid, or get paid late.

It is the same for people who file consumer bankruptcy.

Most of my clients get more offers for credit and at better interest rates AFTER bankruptcy than they do before bankruptcy.

Why is that?

Because credit rating is supposed to measure how likely someone is to pay back a loan in the future.

Someone who just filed bankruptcy and got rid of all of their bad debt is a safer loan than someone who has lots of debt already and could file bankruptcy at any time.

Remember, banks and companies that make loans always want new business.

They won’t ignore an opportunity for new business just because there was a bankruptcy in the past.


If you think that debt is holding you back in life, why not call my office at 612.824.4357 today for a free consultation?

Bankruptcy is a very powerful thing, and we will make sure that you get the financial fresh start that you need.

The post Toys R Us Files Chapter 11 Bankruptcy appeared first on Bankruptcy Attorney Minneapolis | Chapter 7 and Chapter 13 Bankruptcies | Law Office of Curtis Walker.

This post first appeared on Bankruptcy Truth, please read the originial post: here

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Toys R Us Files Chapter 11 Bankruptcy


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