Wisconsin dairy Golden Guernsey has filed for bankruptcy this week under Chapter 7, leaving more than 100 people out of work quite suddenly. OpenGate Capital, which acquired the company in 2011, cited the lack of financial autonomy as the leading cause of the bankruptcy filing.
How Chapter 7 Works
The Golden Guernsey bankruptcy filing, as unfortunate as it is, is a perfect time to bring up Chapter 7 bankruptcy, how it works, and what it entails for a company, such as the now-defunct dairy.
Chapter 7 gets its name from the part of the United States bankruptcy code of which it is a part – chapter 7, title 11, to be more specific. Chapter 7 specifically deals with the liquidation of assets after the filing, as opposed to Chapter 11 or 13, which deal more specifically with asset reorganization.
In order to file for Chapter 7, one must file for bankruptcy in federal court. Additionally, this specific version leads to a total shutdown of the company, leaving employees out of work, placing the entire company and its constituent parts up for sale, and naming a trustee into the position of selling these various components to make up the debt the company is suffering.
This method also dissolves any partnerships within a company, as well as the corporate entity itself, rendering the entire operation a thing of the past, though some of its constituent parts might live on as sold-off pieces to other brands, companies, or product-makers.
For example, the Golden Guernsey trademark could be sold to another company as part of the liquidation. In addition, any other products specific to the brand could be sold off – rights, secret recipes, etc – to any interested bidder.
These sales might not benefit those who lost their jobs, but they could potentially provide new job openings under reconstituted branding.