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Importance in Recent Economic Climate

Importance In Recent Economic Climate

Once upon a time, Chapter 11 bankruptcies in the United States may have been an afterthought for many Americans; something more remote or abstract. However, when their favorite store or restaurant chain recently went out of business, the theoretical decision to file Chapter 11 bankruptcy suddenly became very real. It is not as if Chapter 11 bankruptcies are only happening in one section of the country.

Amid the recession, businesses are failing to meet their debts or are just failing period, and not just in retail and food service, but in a number of important industries. In short, everyone is feeling the pinch from the hurting economy, and as companies continue to file Chapter 11 bankruptcy, the effects are felt by consumers.

Oftentimes, the move to file Chapter 11 bankruptcy by a corporation is a precursor to its disappearance as known and/or the eventual liquidation of its assets. Indeed, both Chapter 11 bankruptcies and closures have risen in incidence since news of the recession first began to inundate news reports, and as a result, a "Catch-22" situation of sorts has ensued.

With companies going under and thus fears of inability to maintain solvency ever-present, consumer confidence has taken a toll, and Americans are striving to save where they can. However, in doing so, they are hurting an already damaged U.S. economy so critically dependent on people spending money, and yet more businesses are forced to shut down. Truly, the need for individual organizations to file Chapter 11 bankruptcy creates a vicious cycle for consumers and producers.

It must be stressed that Chapter 11 bankruptcies do not always lead to companies going out of business. After all, to file Chapter 11 bankruptcy is to attempt to reorganize a business/estate so that it will be able to keep its head above water. Nonetheless, even though a store or other corporate entity may not go out completely, it may still be forced to close certain branches that are under-performing in these uncertain times. As these subdivisions go, not only do the customers, but also the employees.

The lack of consumer confidence coupled with the unexpected job losses have certainly affected companies and individuals in the here and now, but long-term goals are also being impacted by the current climate. Concerning pre-recession projects, numerous public works and housing developments have had to be halted mid-stream because funding has run out from the agency or individuals that were supposed to be sponsors. Moving forward, the collateral damage from so many decisions to file Chapter 11 bankruptcy has hurt families' dreams of home ownership.

NEXT: Learn About Chapter 11 Statistics

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