JC Penney Facing Potential Chapter 11

According to an expert bankruptcy attorney who has been watching the company, retail giant JC Penney is flirting with Chapter 11 bankruptcy, and if the company does not get a significant cash inflow from investors, will be forced to declare bankruptcy. It is believed that JC Penney will end up declaring Chapter 11 bankruptcy as the corporation continues to face declining revenues and failing investor confidence.

Rumors Self-Fulfilling

The retailer may be facing a crisis similar to that which befell the stock market back in the 1930s, or that which causes runs on banks. The crisis is a self-fulfilling prophecy, whereby rumors of the corporation’s impending Chapter 11 bankruptcy cause investors to shy away from sinking money into the company; however, the company needs that money to continue operations, and so even if the money would have saved them from Chapter 11, they will have to file due to the hesitance of investors. For example, recently JC Penney’s publicly traded stock took a big hit when rumors began to circulate that the company had retained a bankruptcy attorney of their own. Spokesmen from the company have 100% denied the rumors, but nonetheless the damage has been done.

The latest blow came when an investment ratings firm downgraded JC Penney’s credit rating. These factors could very well combine to cause the retailer to wind up in bankruptcy court with a Chapter 11 petition in hand in the near future.