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Massive debts send Flywheel in to Chapter 7

On Behalf of | Oct 13, 2020 | Chapter 7 Bankruptcy

Many people in Texas might think that Chapter 7 bankruptcy is only an option for individuals looking to have certain debts discharged. That assumption comes from the notion that a business experiencing financial struggles would rather seek a Chapter 11 case that would allow it to continue its operations through a reorganization.

Yet a business’s future depends largely on its assets. A company that has little assets in comparison with its liabilities may have no choice (provided it cannot find a financial benefactor to assist it through a sale) but to liquidate its assets in hopes of being able to settle many of those debts.

Stationary bike studio chain seeks Chapter 7 bankruptcy protection

The bankruptcy case of a national stationary bike studio chain serves as an example of this scenario. Per Club Industry, Flywheel Sport’s Inc. maintained a national presence with locations in several states since 2009. Yet like many companies (both large and small), financial struggles crept in to its operations with the onset of the COVID-19 pandemic. Several potential buyers attempted to buy the company in order to help bail it out of its financial troubles, but those attempts all fell through. At the beginning of September, the company closed all of its remaining locations and laid off its workforce prior to filing bankruptcy under Chapter 7. In its filing, the company listed between $10-$50 million in debts compared to only $50,000 in assets.

The benefits of a Chapter 7 bankruptcy protection

As previously mentioned, for both individuals and businesses alike, a Chapter 7 bankruptcy offers the potential of having a certain number of its debts discharged. If one qualifies, this might allow them to re-establish themselves on a firm financial footing. Successfully managing a Chapter 7 case might have a better chance of success when one has access to reliable legal assistance.