Small businesses in San Diego and other U.S. companies experiencing serious financial problems may consider filing for business bankruptcy protection in order to settle debts before a company suffers additional losses or to reorganize debt so that a company can continue to function with less financial strain.
Last week, news began to circulate that Maclaren USA filed for Chapter 7 bankruptcy on Dec. 29, 2011. Although many companies choose to file Chapter 7 in order to liquidate all assets to settle debts with creditors if company leaders believe that the business is defunct, some have speculated that Maclaren USA’s bankruptcy is more of an effort to avoid paying out large settlements resulting from several personal injury lawsuits that have been filed against the company for manufacturing and selling dangerous strollers.
As a result of the speculations regarding Maclaren USA’s reasoning for the bankruptcy filing, a court-appointed trustee may investigate whether the company has attempted to violate bankruptcy laws meant to protect businesses facing real financial troubles.
According to the Huffington Post, Maclaren USA filed for Chapter 7 bankruptcy in December 2011. This form of bankruptcy would result in the complete liquidation of the company, with any assets being distributed amongst the company’s creditors. Several creditors listed in the filing include families who have filed lawsuits against the company to recover damages for their children who were injured by the company’s strollers.
However, just like creditors are banned from harassing consumers who have filed for Illinois bankruptcy protection, any lawsuit filed against a company in the midst of Chapter 7 proceedings must be placed on hold. If the bankruptcy filing is allowed to proceed, the families who are suing the company may only be able to recover damages based on the company’s limited amount of insurance coverage, which could be exhausted rather quickly.
