The spread of coronavirus has caused unprecedented business closures for an indefinite period of time. Shoppers may remember JC Penney’s business rehaul a few years back, with Ellen DeGeneres serving as their spokesperson and eliminating clearance sales in exchange for consistently low prices. For a business that was already struggling, the pandemic has been a nearly fatal blow. The company experimented with a program called “Style on the Go” to offer curbside pickup of orders during quarantine measures. Unfortunately, these efforts haven’t been enough to save JC Penney from considering bankruptcy.What is Chapter 11 Bankruptcy?
A Chapter 11 Bankruptcy, like a Chapter 13, is a reorganization bankruptcy that requires the debtor to repay some or all of its debts. Chapter 11 is primarily utilized by medium to large sized companies. While the company’s management will still handle day-to-day operations, more significant business decisions must be approved by the bankruptcy court.
What does it mean for JCPenney if they file Chapter 11?
If JC Penney files a Chapter 11 bankruptcy, they will still be able to operate and try to return to being profitable. They will be able to keep their assets. As many of their employees are currently furloughed, some (but likely not all) of their employees will be able to return to work.
What is Chapter 7 Bankruptcy?
A Chapter 7 is a liquidation of the filer’s debts. Unlike a Chapter 11 (or a Chapter 13) bankruptcy, Chapter 7 typically does not require the filer to pay back any of their debts. Chapter 7 bankruptcies are typically used by consumers who make less than the median income level for their state.
What does it mean for JCPenney if they file Chapter 7?
If JC Penney files a Chapter 7, the only way it will still be able to operate is if another company buys JC Penney and takes over operations. However, this is unlikely due to JC Penney’s decline that started long before the spread of COVID-19.
Do I have to pay my JCPenney credit card if they file bankruptcy?
You will still owe the balance on your credit card if JC Penney files bankruptcy. If you currently have a reward balance on your card, you should redeem it as soon as possible as you may not be able to if they file bankruptcy. If the lender (JC Penney) closes out your card, it may negatively impact your credit.
Did the Coronavirus pandemic spell the end for JCPenney?
JC Penney stock has gone down 27.6% in the last month. JC Penney currently has 850 locations, with 27 stores being closed in 2019 and 6 closed so far in 2020. The company is estimated to currently have $4.2 billion in debt. It goes against current financial advise to purchase JC Penney stock. While there is a chance that JC Penney may be able to survive if they file a debt reorganization and business picks up after the pandemic, but the future looks bleak due to the struggles JC Penney had before the pandemic started.
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