Monday, April 13, 2009

IS BANKRUPTCY NECESSARILY THE END?

Bankruptcy filings are up more than 9% through the first three months of this year for a total of more than 323,000 petitions, according to Automated Access to Court Electronic Records (AACER), a leading provider of United States bankruptcy data. Of that total, more than 20,000 were commercial or business filings, brought about mainly by increasing job losses and the tight credit markets.

Aside from the discussions about General Motors and Chrysler possibly going bankrupt, there have been a number of fairly high profile bankruptcy cases, including some of the nation’s most prominent newspapers (e.g., The Chicago Tribune) , as well as such erstwhile retail stalwarts as Circuit City and Fortunoff, which was founded in 1922.

There are two types of bankruptcies: Chapter 7 and Chapter 11. Chapter 7 literally means the end – the companies are liquidating, as in the case of the two retailers mentioned above. Chapter 11 doesn’t necessarily mean the end.

To survive Chapter 11 bankruptcy, a company should have a valuable asset base, something that can be reorganized into a viable entity. Communications plays an important part in any reorganization, particularly when you stop to consider the number of constituencies that need to be addressed; the list includes creditors, suppliers, employees, customers, shareholders and so on. The reason: a Chapter 11 bankrupt company will need continued support as it undergoes the reorganization process and approvals of the plan from secured lenders. First, it must overcome the bankruptcy stigma – sales and image are usually badly affected. Customers need to keep buying – and sometimes customers mistakenly believe the doors are closed. Thus, a powerful customer-focused public relations program needs to be designed to rebuild the business. But there are public relations opportunities with the other constituencies as well.

Technorati Tags: Makovsky + Company, Bankruptcy, AACER, job losses, credit market, General Motors, Chrysler, The Chicago Tribune, Circuit City, Fortunoff, Chapter 7 , Chapter 11, business, communications, public relations

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