Sears CEO Eddie Lampert is considering a bid for some of the retailer’s popular brands, like Kenmore, as well as some real estate. It could help the company avoid liquidation.
According to Business Insider, Lampert is the company’s largest shareholder and lender. As part of a rescue plan, he already offered to buy Kenmore and some of the retailer’s home service businesses. Forgiving Sear’s debts could allow him to finance his bids and help the retailer’s finances.
The 125-year-old retail company is currently under bankruptcy protection and is deciding whether it wants to go through a more traditional bankruptcy reorganization.
Businesses struggling with financial woes can file for bankruptcy four different options for bankruptcy. Some involve shutting the doors of your business, and some options allow you and your business to move forward.
Chapter 7 bankruptcy
Chapter 7 bankruptcy liquidates a business. Essentially, the court sells off all the business assets and then uses the money to pay off creditors. This is the best option for business owners that want to close their doors.
Chapter 11 bankruptcy
During a Chapter 11 bankruptcy, a business can continue operating. You create a reorganization plan with the court and creditors. The plan typically involves creditors receiving partial payment for what they are owed, like in the case of CEO Lampert. The business then gets to keep its door open after the reorganization.
This filing makes sense for businesses with regular income and substantial assets, but perhaps are just behind on payments.
Chapter 13 bankruptcy
Chapter 13 is typically reserved for individuals, but sole proprietorships or other individuals trying to recover personal money from business failures may fail for this type of bankruptcy. This involves a repayment plan that your property while you pay the debt back.
For anyone with personal assets at risk due to a business failure, this may be a good option.
Chapter 12 bankruptcy
Chapter 12 is limited to family farms. Like Chapter 11 and 13, it allows your farm to keep operating and protects it from creditors. You work with the court to reorganize and pay off your debts. This type of bankruptcy also factors in the unpredictability of agriculture income.
Though it is unclear what Sears will do, there are a couple options available, depending on whether it is ready to liquidate or continue doing business.