According to reports, small businesses have been caught in the crosshairs of Sears Holdings bankruptcy. Sears filed for bankruptcy on October 15th, 2018, after several failed attempts to save the business. Things haven’t been going well on the business front for this company as small business owners are bearing the brunt of this as the Sears Holdings estate it trying to take payments back from these small businesses. This process according to reports, is an attempt to gather funds to close its bankruptcy case. In this article, we will take a look at how the Sears Holding bankruptcy is impacting small businesses.
The unusual way Sears is trying to take back payments made to vendors
The estate of Sears Holding Corp filed over 700 adversarial proceedings lawsuits. These lawsuits were filed against creditors (which in this case are vendors and small businesses) that received payment for products or services within the preference period (within the 90-day mark before the bankruptcy was filed). Although this procedure is standard, several professionals are struck by the unusual nature the company is going about it as there are a large number of vendors and creditors who will be affected.
The estate is expected to file more lawsuits
Court papers show that the Sears Holding Corp estate filed over 300 lawsuits in November of 2019, and in addition to those recently filed, it is expected to file more lawsuits that will come to a total of about 2000 vendors. The funds gotten back from these small businesses will go towards paying bankruptcy administrative costs.
Small businesses will lose a lot
The small businesses affected in this bankruptcy debacle will lose greatly on all fronts, according to industry experts. Many of them will eventually settle to repay less than the company asked for but the legal fees they will accrue in the process will affect them substantially. Small businesses that served as vendors to Sears will undoubtedly hurt with these lawsuits in motion. Sears has had various issues with vendors before now from owing them to not showing any sign of paying them what is owed.
Sears holdings proposals
There have been two procedures proposed by the Sears Holding Corp estate and both of which are based on the total amount transferred. Payments less than $500,000 will be first sent to non-binding mediation before discovery, while those over the $500,000 mark will begin with discovery. The estate has also offered an extension for creditors to answer the suit filed by 60 days after the initial time terminates. According to the estate court documents, these procedures proposed will help encourage settlements, simplify litigation, and reduce costs.
Wrapping it up
Despite Sears Holdings’ effort to offer procedures that will lessen the effect on small businesses, it is no doubt that they will still suffer as the cost will affect their businesses greatly. These vendors and businesses have been servicing this company before they went bankrupt, and it seems like they’ll be suffering alongside Sears.
If you or small business are suffering financially, you need help. The attorneys at Dsouza and Strachan have the knowledge and experience to get you back on track. Contact Dsouza and Strachan today for a free consultation.