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Chapter 11 bankruptcy helps revitalize popular clothing retailer

Many people tend to view bankruptcy as the end of the line, particularly for struggling businesses. But while some businesses do decide to close their doors forever, others use bankruptcy as a way to restructure and revitalize what had been and could still be a profitable endeavor.

The latter seems to be the approach taken by “Dots,” a women’s clothing retailer that filed for Chapter 11 bankruptcy in January of this year. As part of bankruptcy proceedings, some 359 Dots stores around the country closed and liquidated merchandise. But the Dots brand was recently purchased by a Florida retail firm, which has already reopened eight stores, with plans to reopen an additional 120 by the end of next year.

Chapter 11 bankruptcy is sometimes called “reorganization” bankruptcy, which refers to the reorganization of debts. It also refers to reorganizing business practices, investments and anything else needed to make the company profitable again.

Not all businesses will change ownership in Chapter 11. But in the case of Dots, many complained that things really started to go downhill when the company’s founder sold it in 2011 to a private equity firm. As such, a transition of ownership seems like a smart move.

The Florida firm that bought the Dots brand has plans to revitalize the chain by avoiding some of the merchandise missteps that led to bankruptcy in the first place. These included complaints from once-loyal customers that Dots merchandise had gone down in quality, that there were not enough larger sizes in stock and that newer products introduced by the company were not age-appropriate for the customer base.

Chapter 11 tends to be more complex than other forms of bankruptcy, but it can also be very rewarding to see a business come back to life. If you think Chapter 11 may be right for your struggling business, please seek the help of an experienced bankruptcy attorney.

Source: The Wall Street Journal, "Retailer Dots Bounces Back After Shutting Down in Bankruptcy," Katy Stech, Aug. 1, 2014

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