2017 brought a number of high-profile Chapter 11 bankruptcy filings into the spotlight. Companies like Seadrill Limited (a deepwater drilling contractor) and Walter Investment Management Corp. (mortgages) lead the pack with debt of $21.7 billion and $16.8 billion, respectively. Other high-profile companies include Toys “R” Us, Gymboree, Charming Charlie, Gander Mountain and Payless. Also, the Commonwealth of Puerto Rico—after Congress passed a special statute—put a plan in place to restructure an estimated $73 billion of debt.
But does filing Chapter 11 always mean the end? Companies often adopt a bankruptcy strategy to continue research and development to find new revenue streams while pushing back litigants. When a corporation files for Chapter 11, an automatic stay is triggered.
Automatic stay explained
The automatic stay provides a breathing spell for the business filing Chapter 11. Going into effect the day of the filing, all judgments, foreclosures, collections and repossessions of property as well as lawsuits or other legal action against the debtor is effectively halted. The debtor is not allowed to make payments to creditors during this time for debts that arose before the filing. Ongoing, ordinary business expenses will continue to be paid.
VidAngel enjoys protection
VidAngel, the entertainment platform based out of Provo, Utah, allows users to filter language, violence and nudity from movies and series on Netflix, Amazon Prime and HBO. According to the VidAngel press release, “VidAngel has been engaged in a protracted legal battle with Disney, 20th Century Fox, Lucasfilm, Warner Bros, New Line Cinema, Marvel and Turner Entertainment. In response, VidAngel has mounted a robust legal defense. Today’s (Chapter 11 bankruptcy) filing represents another legal step to protect the future of filtering.”
The filing comes nearly two months after the Ninth Circuit ruled in favor of Disney, 20th Century Fox and Warner Bros in the studios’ lawsuit against VidAngel. The company might be attempting to stall legal action and capitalize on its profits from a new streaming service while continuing business operations during the restructuring. VidAngel has claimed that it needs time to cultivate a newly launched streaming platform.
Before considering bankruptcy, consult with an attorney with extensive Chapter 11 experience to offer you the best chance of keeping your assets and business.
