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Carol's Daughter reorganizing with Chapter 11 protection

Many Wayne County residents understand that it is possible to rebuild one's finances and become stable - even successful - after filing for bankruptcy. The same is true for businesses that file for bankruptcy under Chapter 11. Unlike Chapter 7 which means the end of the business and liquidation of assets, Chapter 11 business bankruptcy allows companies to reorganize and continue operating without the burden of debt weighing them down.

One recent business to file for Chapter 11 is the company behind the Carol's Daughter line of stores and beauty products. Carol's Daughter products feature natural ingredients and are sold in the company's stores, online and by Home Shopping Network and other third parties. Some 2,000 other retail stores across the country also sell Carol's Daughter products, which are generally designed and marketed for African-American women. The company has enjoyed support from celebrities like Jay-Z and Will Smith.

The past few years have seen a number of hardships for the brand. Five of the seven Carol's Daughter stores have closed and more than half of its 42 employees have been let go. However, the company hopes that a shift in focus to those other retail outlets around the country will help return the brand to profitability while it reorganizes around its two remaining Carol's Daughter stores.

A reasonable business reorganization plan like this is required of any business seeking protection under Chapter 11. Once the court confirms the plan, the business can continue without the same pressure from creditors holding it back - an automatic stay prevents any attempts at collection. Debts from before the confirmation date are either wiped out completely or paid back over time in accordance with the plan, and payments under Chapter 11 are likely to be much more manageable than they would be otherwise.

Of course, every business seeks to become as profitable as possible. But hard times do not have to mean the lights go off and the door locks up behind the last customer for good.

Source: The Wall Street Journal, "Carol's Daughter Companies File for Bankruptcy," Jacqueline Palank, April 24, 2014

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