One of the largest trucking companies in the country has been experiencing financial difficulties. The company has had at least a 20% out-of-service rate for its drivers. In addition, the company’s out-of-service rate for its vehicles is nearly three times the national average. The company, like some businesses in Mississippi, could not overcome its financial problems and chose to file for bankruptcy protection.
Company officials reported a substantial decrease in revenue in the past year. This was a primary factor in the decision to file for Chapter 7 bankruptcy. Its assets will now be liquidated. The net proceeds will then be used to pay back creditors.
Revenue dropped millions before petition was filed
Several years ago, the company generated more than $5 million and $6 million in recent years. This year, however, revenues through July 14 totaled about $1.5 million. When a company experiences such a drastic drop in cash flow, it can struggle to pay its bills, including paying employees. In this case, it’s expected that there will not be enough funds to pay unsecured creditors after liquidation proceeds are used to pay secured loans and administrative fees.
Chapter 7 is a bankruptcy program that is available to individuals as well as business owners. Unlike an individual who must take a means test to determine whether his or her income is below the median level of the state in which the petition is being filed, a business is not required to take this test. Business owners might file under Chapter 7 or Chapter 11, depending on their circumstances. An experienced bankruptcy attorney can help determine which program best fits a specific client’s needs.