Owning a business is difficult. Not only does it involve a great deal of hard work, but it also involves a great deal of capital. In many cases, circumstances beyond a business owner's control can have a major impact on the overall success of the operation. As a result, many businesses in California seek financial relief through Chapter 7 bankruptcy proceedings.
The much-loved California hobby story, D&J Hobby Inc., has recently initiated bankruptcy proceedings. The store, which is known for its stock of model rockets and cars, and electric trains, was reopened by the original owner's son after it was closed for a period of time. Despite earnings of approximately $880,000 in 2013 and $1.1 million in 2014, the business saw a drop in sales to $532,000 in 2015.
Recent court filings indicate that the business has just over $40,000 in assets and just under $540,000 in liabilities. The business owners claim that a string a break-ins, resulting in losses of almost $34,000, took a toll on the store. While insurance covered the losses, it resulted in higher insurance rates.
When a business files for Chapter 7 bankruptcy in California, its assets are typically sold and the proceeds distributed to creditors. For many businesses, this is the best option when they find themselves struggling financially. Whether filing for bankruptcy is the right option for an individual company must be decided on a case-by-base basis. Having an attorney with experience with bankruptcy law can help ensure that business owners are making the most appropriate decision for their unique situation.
Source: bizjournals.com, "San Jose's beloved D&J Hobby files for Chapter 7 bankruptcy", Nathan Donato-Weinstein, Dec. 3, 2015