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One Resort Requires Five Chapter 11 Filings

Posted on February 25th, 2014

A single-location resort would not appear to be the source of multiple business bankruptcy filings, but when it is operated by five business entities, it requires five separate Chapter 11 filings. That is what occurred in late 2012 when five commercial bankruptcy proceedings were filed in the bankruptcy court in Phoenix related to the operation of a resort in Nevada.


A Phoenix resident owns the limited liability companies that operate the resort. The bankruptcy papers filed with the court list assets ranging from $1 million to $10 million and liabilities within the same range for each of the companies. The resort is open and, according to an employee, expects to remain open during the commercial bankruptcy process.


A business owner may turn to a Chapter 11 business bankruptcy with the long-range goal of continuing operations and emerging from bankruptcy financially stable and better able to compete within its industry. A bankruptcy attorney working with a struggling business might suggest a business bankruptcy because it allows a business owner to cancel and renegotiate unfavorable leases and other agreements in an effort to obtain better terms.


Chapter 11 bankruptcy allows a business to continue operating while its owner participates in business debt negotiations with creditors to obtain more favorable credit terms or a reduction in outstanding debt. A bankruptcy court stay prevents the seizure of assets and other collection efforts by creditors while the company is going through the business reorganization.


A business that cannot successfully negotiate a workable plan with its creditors to continue its business operations will undertake an orderly liquidation of assets and cease operations. The funds obtained through the sale of assets will go toward satisfying the debts of the business.


Source: Phoenix Business Journal, “Owner of Nevada resort lodge files five business bankruptcies in Phoenix,” Mike Sunnucks, Dec. 17, 2012


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