Last month, Goodwill Industries of Southern Nevada Inc. filed for Chapter 11 bankruptcy. The nonprofit organization made a public statement on their website sharing that the “recent expansion, the retail turndown, and increased operating costs to run our retail stores all have led us to make [this] difficult decision.”
Goodwill Industries of Southern Nevada runs 50 donation centers and retail stores in Las Vegas; their debt totaled approximately $22 million at the time of filing for Chapter 11.
Finding a Solution
Sales at local stores began declining rapidly about a year ago, in fall of 2016. However, the turndown was not exclusive to Southern
Nevada. Goodwill stores nationwide experienced a steep decline. Some speculate the decline was tied to the retirement of Steve Chartrand, who resigned in May of 2016 after devoting 20 years to Goodwill as CEO. Others wonder if the financial troubles were due to widespread overstaffing within the company or high rents. Whatever the reasons, the Goodwill of Southern Nevada is now facing the need for major restructuring and reorganization.
Chapter 11 bankruptcy is commonly known as a reorganization bankruptcy. When a company files for this form of bankruptcy, they intend to keep their business alive, paying creditors over time, often at reduced rates. The Chapter 11 bankruptcy process begins with the filing of a petition in a bankruptcy court. The petition may be voluntary, filed by the debtor, or it may be involuntary, submitted by the creditors.
Following that, a plan of reorganization is a vital part of the Chapter 11 process. Courts and debtors must see a statement containing the company’s assets, liabilities, relevant business affairs, and the detailed strategy for how the company expects to repay debtors. For the enterprise in question, this often includes hiring outside consultants to help re-structure and re-organize the company.
All of Goodwill of Southern Nevada’s judgments, collection activities, foreclosures, and repossessions of property will be suspended during the Chapter 11 restructuring process. This will give the company time to negotiate with its creditors. For 120 days after filing for Chapter 11, Goodwill maintains the exclusive right to file the reorganization plan; they also have 180 days to persuade creditors to accept the plan. If Goodwill misses its deadlines, creditors can file their own reorganization plan.
Once a reorganization plan has been selected, the Chapter 11 bankruptcy court confirms that the plan is feasible and implemented.
Best of luck to all parties involved in this case.