Sears Finally Files Chapter 11 Bankruptcy

: Chris Lee Law Firm

  Filed under: Chapter 11

It was just 2012 when Sears Holdings, which bought Kmart in 2005. Before that, in the 50s and 60s, Sears, Roebuck & Company was one of the largest international department store chains in the world. For the past several years, financial analyst and corporate bankruptcy specialists in Texas have warned that Sears may be the next big box retailer to file for Chapter 11 bankruptcy in order to untangle its massive debt structure. Last week Sears’ stock price was hammered on rumors that the company had hired a bankruptcy advisory firm to assist it in preparing its Chapter 11 bankruptcy protection petition. Those who believe that bankruptcy could be just weeks away from the iconic retailer are bolstered by a report from the Wall Street Journal about the company’s $134 million debt payment was due this week. Today, the company confirmed that it has indeed filed a voluntary petition for Chapter 11 bankruptcy with the US Bankruptcy Courts.

What a Sears Bankruptcy Looks Like

For investors, employees, and patrons of Sears, the thought of bankruptcy leaves an uncomfortable uncertainty. When retailers enter into Chapter 11 bankruptcy protection, falling stock prices, layoffs, and store closings are typically not far behind the bankruptcy filing.

For investors who have held stock in Sears, it may be a good time to look at your overall portfolio and talk with your financial advisor about the best situation for you in this unusual time. Many employees worry about their pension from Sears, as the company’s bankruptcy could launch what retirement specialists say could be the biggest pension default ever from an American Company. The federal Pension Benefits Guarantee Corp., however, insures both of Sears pension plans and will cover the roughly 90,000 retired employees.

For Employees and customer alike were surprised about the large number of stores that sears has closed with as many as 400 Sears and Kmart by the end of this year. “Sears has seen same stores sales decline over the last 26 straight and so foreclosure was inevitable”, according to Seth Green at Loyola University in Chicago. Overall, Sears is expected to lay of over 5,450 employees across more than 100 stores.

Loyal customers of Sears have already seen a multitude of Sears and Kmart stores closing with the company announcing new store closures at the end of this year. If your local store closes it may be necessary to find a new department store, travel further to find another Sears or Kmart, or familiarize yourself with shopping online. A trend which has been attributed to the downfall of the brick and mortar retailer demise. Retail experts also recommend that you cash in your Sears gift cards immediately or risk losing out if the company goes completely defunct. Extended warranties and return policies shouldn’t change too much, although if you have something in layaway, it may be fruitful to go ahead and pay for the items.

Chapter 11 Bankruptcy

While Chapter 11 bankruptcy is often looked at as bad news, it shouldn’t always be so. True, many brick-and-mortar retailers such as Toys-R-Us were not able to reorganize their debt without completely closing up shop, many companies are able to reorganize and stay in business with a more powerful balance sheet. Stay tuned for more news surrounding Sears’ bankruptcy case to find out if the company will be able to successfully to reorganize its financials under Chapter 11 bankruptcy protection and emerge a more profitable company.

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