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What Happens When a Retailer Goes Bankrupt?

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Just when it looked like the so-called retail apocalypse was all the way in the rearview mirror, it managed to claim another victim. A long-beleaguered Sears Holdings (SHLDQ, $0.40) finally was forced to file for Chapter 11 bankruptcy protection on Oct. 15, 2018. That vindicated numerous doubters who were surprised Sears hung on as long as it did.

But the decision is hardly an event. That is, the decision to file bankruptcy sets off a chain of open-ended processes that might let the company regroup on firmer footing.

Retail bankruptcies such as Sears’ are unique in that most ultimately attempt to remain operational during the restructuring process. That’s because restarting such a business can often be far more expensive and difficult than simply keeping them up and running … even if the operation is bleeding money as-is.


Here are 10 steps that most bankrupt retail outfits – including Sears – typically will follow once it’s clear they can’t earn their way out of insolvency. The sequence of events isn’t necessarily set in stone, but it largely has to unfurl in a way that’s close to this order.

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