Current:Home > MyAfter Red Lobster's bankruptcy shocked all-you-can-eat shrimp fans, explaining Chapter 11 -Elevate Capital Network
After Red Lobster's bankruptcy shocked all-you-can-eat shrimp fans, explaining Chapter 11
View
Date:2025-04-16 08:35:55
For many Americans, your local Red Lobster may be a thing of the past.
The seafood chain closed dozens of restaurants ahead of an announcement last week that it was filing for Chapter 11 bankruptcy in Florida. The Sunshine State, New York and Texas had the most closures, USA TODAY found.
But does this mean the seafood chain will be gone for good? Here’s what filing for Chapter 11 bankruptcy means.
What is Chapter 11 bankruptcy?
A Chapter 11 bankruptcy is a reorganization, usually for a corporation or partnership. The debtor typically remains in possession as a trustee. With court approval, they can still operate the business and borrow new money. Most importantly, the corporation will propose a reorganization plan to pay creditors over time, which affected creditors vote on.
The corporation doesn't liquidate its assets as in other types of bankruptcy. This is because the party in debt is more valuable in operation than liquidated because issues are likely only temporary, like low cash flow or weakened demand, according to the Cornell Law School’s Legal Information Institute.
In the case of Red Lobster, its bankruptcy filing detailed a 30% drop in guests since 2019. Other issues include debt, a slew of new CEOs and an all-you-can-eat shrimp controversy.
"Filing for bankruptcy does not mean we are going out of business," reads part of Red Lobster's statement. "In fact, it means just the opposite. It is a legal process that allows us to make changes to our business and our cost structure so that Red Lobster can continue as a stronger company going forward."
It wasn't just the endless shrimp:Red Lobster's troubles detailed in bankruptcy filing
How does bankruptcy work?
Bankruptcy helps individuals or businesses settle debts they can no longer pay by liquidating assets or making a repayment plan. Bankruptcy is regulated by federal bankruptcy laws.
After you declare bankruptcy and the bankruptcy court eliminates your debt, collectors can no longer contact you about it.
Not all debts can be eliminated by bankruptcy, including debt from child support or spousal support, most student loans, tax debts, government fines, wages you owe your employees or damages for personal injury you caused while driving intoxicated.
Types of bankruptcy
There are six types of bankruptcy. Some are specific to individuals while others serve large companies or municipalities. Here’s a look at the four you probably hear about the most:
- Chapter 7: For individuals or corporations, assets are liquidated
- Chapter 11: Reorganization (rather than liquidation) for corporations or partnerships (individuals can file, too)
- Chapter 12: Family farmers and fishermen with regular income
- Chapter 13: Individuals to keep property and pay debts over time, also called a “wage earner’s plan”
Just Curious for more? We've got you covered.
USA TODAY is exploring the questions you and others ask every day. From "What do you need to open a bank account?" to "What is a monopoly?" to "How much can a landlord raise rent?" – we're striving to find answers to the most common questions you ask every day. Head to our Just Curious section to see what else we can answer for you.
Contributing: Gabe Hauari
veryGood! (4)
Related
- Biden administration makes final diplomatic push for stability across a turbulent Mideast
- Why Pregnant Serena Williams Kept Baby No. 2 a Secret From Daughter Olympia Until Met Gala Reveal
- Priyanka Chopra Shares the One Thing She Never Wants to Miss in Daughter Malti’s Daily Routine
- How to Watch King Charles III and Queen Consort Camilla’s Coronation on TV and Online
- Intel's stock did something it hasn't done since 2022
- Some hospitals rake in high profits while their patients are loaded with medical debt
- Half a million gallons of sewage leaks into Oregon river after facility malfunction
- Supreme Court Halts Clean Power Plan, with Implications Far Beyond the U.S.
- Dick Vitale announces he is cancer free: 'Santa Claus came early'
- Today’s Climate: June 10, 2010
Ranking
- Federal Spending Freeze Could Have Widespread Impact on Environment, Emergency Management
- Travelers coming to the U.S. from Uganda will face enhanced screening for Ebola
- Damaris Phillips Shares the Kitchen Essential She’ll Never Stop Buying and Her Kentucky Derby Must-Haves
- How to keep safe from rip currents: Key facts about the fast-moving dangers that kill 100 Americans a year
- Why we love Bear Pond Books, a ski town bookstore with a French bulldog 'Staff Pup'
- Today’s Climate: June 2, 2010
- A public payphone in China began ringing and ringing. Who was calling?
- Troubled by Trump’s Climate Denial, Scientists Aim to Set the Record Straight
Recommendation
Why members of two of EPA's influential science advisory committees were let go
Today’s Climate: June 9, 2010
How Queen Elizabeth’s Corgis Are Still Living Like Royalty
Dirtier Than Coal? Under Fire, Institute Clarifies Its Claim About Biomass
Former longtime South Carolina congressman John Spratt dies at 82
Prince Harry and Meghan Markle's Son Archie Turns 4 Amid King Charles III's Coronation
4 ways the world messed up its pandemic response — and 3 fixes to do better next time
Arctic Report Card: Lowest Sea Ice on Record, 2nd Warmest Year