The recent decision involving national toy retailer Toys ‘R’ Us which led to a widespread store closure has generated some interest in the media about the bankruptcy process. As an individual facing bankruptcy in Tennessee, this could lead to confusion and even misinformation. 

One main issue is that individuals and sole proprietors do not often use the same type of bankruptcy as do corporations or business partnerships. There are various factors that could go into the decision of which chapter under which an entity should file, including the eligibility of the applicant, relative simplicity of some options and post-decision goals of the individual or business filing for bankruptcy. 

A New York Times article on the Toys ‘R’ Us collapse underlines one of the most common reasons that individuals opt to file for chapter 7 or 13: chapter 11 is prohibitively complicated and expensive. The Times article states that lawyers representing the company were charging upwards of $2,000 per hour. Further documents suggest that the company expects to pay almost $350 million to renegotiate and refinance its approximately $200 million in debt. 

In Forbes, an article explaining personal bankruptcy to those who intend to file also mentions the Toys ‘R’ Us case, if only in passing. The focus of the Forbes piece seems to be instilling reasonable expectations of the process by discussing the following points:

  • Bankruptcy might not help with some debts
  • The process requires some commitment
  • Choosing the correct type is essential to success

While personal bankruptcy is unlikely to be as convoluted or expensive as the examples covered in these Forbes and New York Times articles, patience, effort and a commitment of resources are generally all still necessary for success. Establishing realistic expectations for each option is one of the best foundations on which to plan for the future and decide on a course of action.