Beloved retailer warns customers about Chapter 11 bankruptcy scam
Once a company files for Chapter 11 bankruptcy, its customers become vulnerable to scams (and sometimes have to watch the retailer itself).
Companies usually file Chapter 11 bankruptcy as a last resort. That's because once they file, a court has control of the choices they make around the business.
A company can even enter Chapter 11 with a plan to sell itself to its vendors, lenders, or another friendly party. The bankruptcy court can ignore that plan if a better offer comes along.
Related: After bankruptcy, retail chain liquidates stores, seeks buyer
The court has to consider the best interests of everyone involved. One offer might kept the chain open and allow many workers to keep their jobs. But if vendors and lenders prefer a higher cash offer that liquidates the company and pays them more of what they're owed.
It's a dangerous and slippery slope where a lot can go wrong, and even being successful in the process does not guarantee future success.
In many cases, bankrupt retailers hire an outside firm to handle their liquidation sales. Those companies can sometimes bring in outside merchandise and leverage the brand name and reputation of the company being liquidated to sell items it otherwise might not have carried.
