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Any Chance for Mattress Firm to Avoid Bankruptcy Has Been Put to Bed

Mattress Firm is the largest bed store in America.  They have over 3,500 locations after merging with their largest competitor.  Unfortunately, this merger and the rise of online bed-in-a-box shopping has eaten up the company’s market share and taken customers out of their stores.

About Mattress Firm

According to their website, Mattress Firm has over 3,500 store locations in 49 states.  At their peak, in 2015, they reported over $3.5 billion in sales.  Over the last 30 years they have absorbed companies such as:

  • Sleep Train – purchased for $425 million in 2014, this company was huge in the west and northwest.
  • Discount Mattress Barn – was purchased and rebranded in 2014.
  • Sleep Country USA – also a large chain in the pacific northwest, this company changed their brand name after being purchased by Mattress Firm in 2015.
  • Sleepy’s – in 2015, this company was bought out for $780 million.

The last purchase left Mattress Firm with over 3,500 stores.  While this can be indicative of a strong successful company, sometimes it is too much growth to be sustainable.

Mattress Firm’s Problems

As previously stated, too much growth can be a killer for a company.  The CEO of Mattress Firm admitted that they had too many stores competing with one another.  In 1990, the company tried its hand at selling furniture which was a complete failure. However, the companies biggest mistake was waiting to create an online presence.  Casper may be personally responsible for changing the mattress industry and burying Mattress Firm.  Casper is known for great customer service, a sleek website, and shipping (for free) a high-quality mattress-in-a-box.  Even today, Mattress Firm’s website is not as modern and inviting as Casper’s.

Mattress Firm

mattress firm

Casper

casper

Every year, dozens of companies are failing because of their refusal to invest in their online presence.

Details of Mattress Firm’s Bankruptcy

After filing for chapter 11 bankruptcy, the company plans to:

  • Close 200 stores immediately.
  • Close 500 more stores by the end of the year.
  • Exit bankruptcy within two months.
  • Open stores in new thriving markets.

Another note, Casper plans to open 200 brick and mortar locations in the near future to catch customers who prefer to feel the mattress before they purchase it.

Bankruptcy is a valuable tool that can be used to get you or your business back on track.  It is also a very complex process.  To use this valuable tool, you need the experience and skill of a licensed attorney.  Elias Dsouza has the experience and skill you need to get back to business.

After 125 Years in Business, Sears Files for Bankruptcy

Just about everyone in America has heard of Sears.  They have been selling us anything from jack-hammers to mittens for over a century.  The giant has been wobbling for some time and now they are officially filing for chapter 11 bankruptcy protection.  Sears is one of the more notable victims of the “online shopping era”. 

A Little Background on Sears

Sears began as Sears, Robuck, and Company in 1892.  They were, at one time, headquartered in the Sears Tower in Chicago.  They started off as a private company, but in 1906 they launched a successful IPO.  Sears is known as one of the first companies to offer their products in an extensive catalogue.  At one time, their catalogue grew to 532 pages!  More recently, Sears merged with Kmart which most people believe was the beginning of the end.

The Kmart Merger

In 2004, after completing its own bankruptcy, Kmart declared that it was merging with Sears.  The $11 billion acquisition yielded a profitable 2006 ($1.5 billion), but soon began to see sales slump.  Between 2011 and 2016, it was reported that Sears lost over $10 billion.  In 2014, Sears began selling off properties and brands to pivot into the technology sector, but by then they were rapidly losing market share to companies like Wal Mart and Amazon.

Chapter 11 Bankruptcy

On October 15, 2018, Sears announced that they were seeking chapter 11 bankruptcy protection.  The CEO, Eddie Lambert, stepped down and three top Sears executives were appointed to see the company through bankruptcy. Additionally, Mohsin Meghji, was named Chief Restructuring Officer.  The current proposed restructuring plan is to:

  • Close 142 stores worldwide.
  • Begin liquidation sales by the end of the year.
  • Focus on the most profitable 400 stores and keep the 68,000 employees working.

Sears is already over $4 billion in debt and the former CEO of Toys ‘R’ Us (for more information on Toys ‘R’ Us’ recent bankruptcy, see Why Did Toys ‘R’ Us Go Bankrupt?) recently commented, “Sears is essentially dead already”.

Bankruptcy can be a terrifying prospect.  The truth is, bankruptcy is a tool to help you or your business get back on track.  If you are considering bankruptcy as an option, you need the skills of an experienced attorney.  Elias Dsouza has been helping people and businesses get back on track for over 15 years.  Contact Elias for a free consultation today.

Why Did Toys ‘R’ Us Go Bankrupt?

Toys ‘R’ Us was a goliath in the toy industry for decades.  It was publicly traded on Wall Street for almost 30 years starting in 1978.  At its peak, the toy retailer’s stock traded for over $45 per share.  Unfortunately, this got the attention of other retailers.  Companies such as Wal-Mart, Target, and Amazon began to steal market share which was the beginning of the end for the toy giant.

Going Private

In 2005, several private equity firms came together to buy up all Toys ‘R’ Us stock for about $6.6 billion.  Unfortunately for those firms, over the next 15 years, competition slowly chipped away at the market share.  Saddled with tons of debt from the stock acquisition and unable to adapt to the changing retail sales model, Toys ‘R’ Us looked to a new CEO.

Plans to Go Public Again

In 2015, David Brandon was hired and many suspected it was to take the company public again.  He was the CEO of Domino’s for 11 years and took them public.  Losing market share and value, public money was the “shot in the arm” Toys ‘R’ Us needed to keep from going under.  However, in October of 2017, any chance the toy company had of surviving was ruined.

The October 2017 Report

Due to the leveraged buyout back in 2005, Toys ‘R’ Us was operating with a huge amount of debt.  Many of the company’s financial obligations were pushed to 2017.  The company failed to go public before the bills were due so they did not have the capital to meet their obligations.  The real “nail in the coffin” came in October of 2017 when a financial report came out stating that, between October of 2016 and October 2017 the toy company operated at a loss of over $950 million.  This killed any chance of going public.  Additionally, consumers were reluctant to shop there during the holiday season particularly for gift cards out of fear that the company would not survive to honor them or provide customer support.

You may not have failed as spectacularly as Toys ‘R’ Us, but your small business may have failed nonetheless.  Being behind on loans and getting harassed by creditors is a horrible feeling that may keep you up at night.  If you find yourself in this position, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group.  He has the skills and experience to walk your through the filing and give you your life back by halting those phone calls and letters from creditors.

Lindsey Lohan’s Mom Files for Bankruptcy

So often is the case that a famous person bites off more than they can chew.  Whether it be houses, jewelry, or friends, people who have money seem to spend money.  Unfortunately, the latest celebrity (kind of) to file for bankruptcy is Dina Lohan.  Dina has been an actor, producer, talent manager, singer, and more in her career which has netted her an estimated $1.3 million.

The Divorce

In 2007, Dina’s divorce was finalized.  Her 22-year marriage to Scott Lohan was marred by alcohol, cocaine, and physical abuse.  Dina maintained custody of their 3 younger kids and the kid’s childhood home which had a mortgage of $1.5 million.

Property Debt

As previously stated, Dina got to keep the home and the $1.5 million in debt that came with it.  Dina has made a decent amount of money throughout her career, but in 2017 the mortgage became too much for her to handle.  The house went into foreclosure even though Lindsay gave her $40,000 to help.  Dina eventually lost the home because she did not respond to the suit within 90 days of the suit filing.  If Dina had read “So You Are Behind on Your Mortgage Payments and You Are Facing Foreclosure” she would have known better.

Taxes and Other Debt

Dina owes thousands in taxes to New York and California.  It is estimated that she owes $4,651 to California and at least $9,000 to New York state.  In addition to state taxes, Dina owes over $45,000 to the IRS, over $10,000 for her Honda, and over $10,000 to her kid’s high school.

Debt can feel insurmountable.  Debt can BE insurmountable.  When this is the case, bankruptcy is a perfectly valid option.  It is a legal tool designed to help an individual (or business) get out from under the thumb of creditors.  People can be forced to file for bankruptcy for many reasons and, while it is not ideal, it can help you move on with your life.  If you are constantly being harassed by creditors and you are ready for a change, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group.  Elias has been helping individuals and businesses navigate the complex process of filing for bankruptcy for over 15 years.  He has the skills to enable you to move forward with your life.

How a Hurricane Can Blow Away Your Credit Score

With Hurricane Florence pummeling the east coast, for many, priorities are being shifted.  When you think of a hurricane, you think of the dangers of high-speed winds, rising water levels, and wide spread homelessness.  What you may not think of is the effect a hurricane can have on your credit score.  While this certainly takes a back seat to safety, it should when you are preparing for the storm.

The data used in this post are from a report released in 2017 by the Kansas City Fed, “Financial Vulnerability and Personal Finance Outcomes of Natural Disasters“authored by Kelly Edmiston.

Who is at risk?

People with relatively high credit card utilization and unpaid bills are at risk of losing more than 80 points on the credit score if they are directly hit by a Category 1 hurricane.  In 2007, Hurricane Humberto slammed into the coast of Texas.  In areas of coastal Texas where:

  • 1% of people had unpaid bills, the average drop in credit score was 16.2%.
  • 5% of people had unpaid bills, the average drop was 81.2 points.
  • People had 10% credit card utilization, the average drop was 17.9 points.
  • People had 40% credit card utilization, the average drop was 71.2 points.

The average drop in credit score for all areas affected by Hurricane Humberto was 46.4 points.

How Can You Avoid or Reduce Your Risk?

The author of the report, Kelly Edmiston, addresses one of the main reasons people find themselves unprepared in the path of a hurricane.  He says, “The problem’s not so much that they’re making mistakes in preparing for a disaster, but they underestimate the likelihood that they’ll be affected.”  Suggestions for preparing include:

  • Paying your bills before the hurricane arrives. You may not be able to pay online, by phone, or by mail if you wait.
  • Notifying your credit card companies that you have to evacuate. This could get you an extension if you are late and they will know not to decline your charges if you relocate to a relatively unusual place.
  • Getting cash before the storm arrives. Many places may not be able to accept credit or debit cards and this can prevent you from over-utilizing your cards.

It can be extremely difficult to prepare for a natural disaster.  Sometimes, even being prepared is not enough.  If your credit has been affected by a hurricane, unexpected job loss, or for any other reason, you may need help getting back on track.  If you want creditors to stop calling day and night, contact Elias Dsouza.  He has the skills and experience to get you back on track.

A Quick Guide to Puerto Rico’s Bankruptcy

Puerto Rico became a United States territory in 1898.  The islands economy relied mostly on agriculture.  However, after World War II, the United States tried to modernize the territory by moving businesses there.  Of course, these businesses moved to take advantage of the lenient tax laws and cheap labor ultimately not improving the Puerto Rico in the long run.

The Economic Rise and Decline

In the 1970’s the federal government passed a tax law with a large loop hole that allowed huge businesses to operate in Puerto Rico while paying almost no taxes.  This was great for the citizens of the territory, but it created an enormous tax deficit for the U.S. government.  In 2006, the law was completely repealed and most of the businesses operating in Puerto Rico left leaving thousands of people jobless and debt on the rise.

Underground Jobs

It is estimated that one-third of the Puerto Rican job force operates “under the table” which is to say that the income on these wages is not traceable and therefore not taxable.  This lack of infrastructure leads to a tax deficit for the territory.

How Does All of This Lead to Bankruptcy?

Due to the lack of tax revenue, the Puerto Rican government cannot sustain itself.  Unable to collect taxes from its citizens, the government sold $61 billion in bonds to some of the largest firms on Wall Street.  That total is now up to $70 billion.  I addition to the debt associated with bonds, Puerto Rico owes its government employees over $43 billion in pension payments.  That puts Puerto Rico over $120 billion in the red.  Just to offer some context, when Detroit, Michigan filed for bankruptcy in 2013, it (only) owed about $14 billion.

While the magnitude of the debt is far different than a person or small business may experience, the solution for this type of bankruptcy is similar.  Currently, the United States government is working with leadership in Puerto Rico to put together a bankruptcy plan that their creditors and the court can agree to.

You may not be $120 billion in debt, but maybe you are behind on loan payments and getting harassed by debt collectors.  If you want the phone calls and direct mail to stop, talk to Elias Dsouza and Dsouza and Strachan Lawgroup Group today.

Remembering Burt Reynolds’…Bankruptcy

Everyone is familiar with Burt Reynolds as an actor.  He starred in movies such as Smokey and the Bandit, Deliverance, Boogie Nights, and The Longest Yard.  What you may not remember is his bankruptcy.  Like so many Hollywood stars, he worked hard and played hard.

Divorce from Loni Anderson

In the early 90’s, after 5 years of marriage Reynold and Anderson filed for divorce.  The original divorce agreement mandated that Reynolds pay $2 million and an additional $47,000 per month in “divorce related expenses”.  He continued to pay various amounts for 22 years until he finally wrote a check to Anderson for over $154,000 to end the arrangement.

Bad Investments

Reynolds admittedly was not very good with money.  He took the advice of his business manager and did not pay attention to his investments.  The first bad investment was in a regional restaurant chain called Po’ Folks.  He and Buddy Killen invested $20 million each and they had problems from the beginning.  It got bad enough to warrant the liquidation of all assets which led Buddy and Burt to make another bad investment with the salvaged funds.

Investment number 2 was in another restaurant chain called Daisey’s Diner.  The same issues caused Buddy to sink an additional $12 million into the investment.  Both Buddy and Burt eventually pulled out.  All-in-all, Reynolds lost around $20 million in these investments.

The Icing on the Cake

Perhaps the biggest mistake Reynolds made was entering into all investments as an individual.  His business manager did not advise him to form a corporation with Buddy Killen which made Reynolds personally exposed to his creditors.  His personal assets became available to creditors when loans were not paid.  Even more questionable, Reynolds told his business manager to just pay everyone he owed instead of working with creditors to settle on lower amounts and payment plans.  This left Reynolds with almost nothing.

If Burt Reynolds had Elias Dsouza at his side, many of these unfortunate events could have been avoided.  Elias has been working with individuals to protect themselves in business transactions, debt defense, and credit restoration for over 15 years.  Contact Dsouza and Strachan Lawgroup Group for a free consultation.

How Does Your Credit Card Debt Stack up Against Other People Your Age?

As of September 2018, the average amount of debt per person is $5,700.  The average balance per household is $9,333.  The total amount of revolving debt in the United States is $1.03 trillion.  41% of the people in the U.S. have some level of credit card debt.  Have you ever wondered how your level of credit card debt stacks up against other people’s in your age group?

0 to 35 – Average Credit Card Debt = $5,808

This group is among the lowest in terms of debt balance.  They are also among the least likely to have a credit card.  People in this age group typically have a lower “operating budget” so they cannot afford to manage much debt. Many Millennials are not opening lines of credit which is hurting their credit score and reducing their chance of getting a card.

35 to 44 – Average Credit Card Debt = $8,235

This is where credit card users start to pick up steam.  By this age, many people have had open lines of credit for more than 5 years.  They are typically in a higher income bracket than the previous group which allows them to get cards with greater spending limits and increases their ability to pay the bill.

45 to 64 – Average Credit Card Debt = $8,627

The “baby boomers” average the largest amount of credit card debt per person.  However, this age group also controls the largest amount of disposable income in the United States.  Additionally, they do not have as much student loan debt.

65 and over – Average Credit Card Debt = $6,326

This group is among the least likely to have a credit card.  However, this trend is changing.  Due to rising medical costs, the debt burden on this age group is increasing.  Some individuals in this group may have trouble getting a credit card even if they want one because, in the event of death, the credit card company could be stuck with the debt.  This fact often makes companies more hesitant to issue a card.

Credit card debt affects just about everyone over the age of 18.  Unforeseen events can lead to credit card overuse and things may get out of control.  If you find yourself in this position and creditors are calling you day and night or if you are ready to start paying down the debt and need guidance, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group.  He has the skill and experience to get you back on track.

 

Data used in the post is from valuepenguine.com.

Donald Trump: The Master of Chapter 11 Bankruptcy

Many businesses file for chapter 11 bankruptcy, Donald Trump’s businesses seem to have this step built into their plan.  With 6 chapter 11 bankruptcies under his built, Trump has shown a willingness to throw ideas at the wall to see what sticks.  Let’s take a look at those ideas that did NOT stick.

First, the Basics of Chapter 11 Bankruptcy

Unlike chapter 7, after filing for chapter 11 bankruptcy, a trustee is not automatically appointed by the court.  A trustee may be appointed if there is sufficient evidence that the debtor has committed less than savory acts such as fraud and gross incompetence.  Chapter 11 bankruptcy is often referred to as “reorganization” of debt.  If the creditor and debtor can agree to a plan, the business can continue to operate and pay back debt in the future.  Reports show that Chapter 11 bankruptcy filed by businesses is successful 10% – 15% of the time.

Bankruptcy #1 – Trump Taj Mahal

The Trumps paid $1.2 billion to build the hotel and resort.  The plan was to use Trump products to outfit the place.  Unfortunately, no one wanted Trump water, towels, etc. In 1991, chapter 11 bankruptcy was filled in an attempt to maintain control.  Trump was able to hang on to the property until 2015 when Carl Icahn took controlling interest eventually selling to the Seminole Indians for $50 million (4 cents on the dollar).

Bankruptcy #2 – Trump Castel Hotel and Casino

This property had trouble paying the bills after Trump opened the Trump Taj Mahal.  Maybe it is not wise to compete with yourself…In 1992, Trump bondholders signed a deal to accept equity and preferred stock in lieu of the debt.

Bankruptcy #3 – Trump Plaza Hotel

1992 was a rough year for Donald Trump.  The Trump Plaza Hotel went bankrupt which led to the transfer of 49% in equity to Citi Bank.  Trump was an estimated $550 million in the red at the time of the filing.

Bankruptcy #4 – Trump Plaza Casino

This property filed along with the Trump Plaza Hotel.  Over $100 million in liabilities have been reported for this filing.

Bankruptcy #5 – Trump Hotels and Casino Resorts

Perhaps this is one of the largest screw ups by Trump.  Trump Hotels and Casino resorts acts as the parent company to three of the afore mentions properties.  In 2004, this holding company filed for chapter 11 bankruptcy with over…wait for it…$1.8 billion (with a ‘b’) in debt.  Trump was stripped of control and his title of CEO only to emerge with a new company called Trump Entertainment Resorts.

Bankruptcy #6 Trump Entertainment Resorts

Trump Entertainment Resorts (TER) is the same group that ran Trump Hotels and Casinos into the ground for all intents and purposes.  To be fair, in 2009, tons of businesses were having trouble paying the bills due to the recession and TER already had debt from previous failed ventures.  When TER filed for chapter 11 bankruptcy, they were $1.2 billion in debt.

If you or your business is upside down in your loans and you are considering filing for bankruptcy under chapter 11, you need help.  This is an enormously complex process and you need someone to protect you from creditors and guide you.  Contact Elias Dsouza for a free consultation today!

Da Brat’s Funkdafied Finances Lead to Bankruptcy

Da Brat burst on to the rap scene in the 1990’s becoming the first female rap artist to have a platinum album (Funkdafied).  While artists do not always amass a fortune, she has made over $3 million in her career.  We are a long way from the 1990’s and Da Brat has found herself in bad financial state.  Let’s review the latest celebrity bankruptcy!

How Does Someone Blow Over $3 million?

Well, to start, she has not put out an album since 2003 and that album did not do very well.  Those familiar with the music business know that a production studio fronts the money required to make an album and then they take a cut of album sales until they get their money back plus a small percentage.  When an album does not do well, the artist is on the hook for the money.  Right now, Da Brat owes Sony Music over $1 million.  On top of that, she owes:

  • Ally Bank – $12,000
  • Georgia Department of Revenue – $2,000
  • IRS – Unknown amount, but she was recently fined $1 million for not paying taxes.
  • Credit Card Debt – $2,000

The Final Blow

In 2007, Da Brat assaulted a waitress with a rum bottle in an Atlanta nightclub.  The waitress suffered enough facial cuts and bruises that she went to the hospital and later pursued compensatory damages.  Da Brat went on to plead guilty and was ordered by the court to:

  • Pay the victim $6.7 million in damages.
  • Accept a 3-year prison sentence.
  • Do 200 hours of community service.

The $6.7 million in damages really put Da Brat on the path to chapter 11 bankruptcy.  According to theblast.com, her assets total at $108,700 and her liabilities equal just under $8 million……ouch.

Maybe you did not smash a bottle of rum over the head of a waitress.  Maybe you did not finance a failing music career.  However, you may find yourself in a position where filing for bankruptcy is the best thing you can do to protect yourself.  If you think this might apply to you, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group.   Elias can guide you through the complexities of bankruptcy and get you back on track.