American Apparel Files For Bankruptcy

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AFTER MONTHS OF FINANCIAL WOES AND LEGAL DISPUTES WITH FORMER CEO DOV CHARNEY, AMERICAN APPAREL HAS FINALLY FILED FOR CHAPTER 11 PROTECTION.

The company filed for Chapter 11 bankruptcy protection on Monday, reports Delaware Bankruptcy Lawyer Ronald Drescher. In a deal that will supposedly allow its 130 U.S. stores to stay open, American Apparel’s $300 million of debt will be cut down to $135 million, through a restructuring that will see its lenders trading their debt for company stock. Those creditors will have to provide additional capital as well, in an effort to keep American Apparel afloat and have its Los Angeles manufacturing center continue operating. The filing did not disclose any layoffs.

Many people wonder what happens with their gift cards when a company files bankruptcy. When a company files chapter 7, they intend to close and liquidate their assests to pay off their debtors. In these cases, it is unlikely that the gift cards will be redeemable. However, when a company enters into a Chapter 11, they are attempting to reorganize and continue operating. Therefore, it is likely that they will continue to accept gift cards, and will receive a first day court order to allow this practice to continue. But don’t wait too long to use them. Sometimes a Chapter 11 can turn into a Chapter 7 if the company’s financial position continues to fail. If you have any questions about what happens with your gift cards after a company files bankruptcy, give our office a call at (410) 484-9000. We would love to answer your questions.

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