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Losing lawsuit forces telecommunications company into bankruptcy

A common misconception about many in Hackettstown may be that the struggles that force people into bankruptcy can be easily avoided through proper resource management. If that is what most believe about individuals, then imagine how much more mismanagement is attributed to businesses that are forced to seek bankruptcy protection. The truth is that many of the issues that result in people and companies considering bankruptcy are unforeseen, and the decision to take such action is only motivated by avoiding further financial difficulties (as opposed to simply getting off the hook for having to pay back their debts). 

This notion is well-demonstrated in the recent bankruptcy filing of a regional telecommunications company based in Arkansas. The company started providing phone and internet services to rural clients. It eventually expanded to offer more information services in other markets, and even was recognized as a Fortune 500 company. Yet it was the decision to spin off its fiber-optic network assets into a Real Estate Investment Trust that led to its financial struggles. Some of its bondholders sued, claiming the move was a violation of their bond agreements. The court ruled in favor of the bondholders, leaving the company facing a massive civil liability. Its decision to file for Chapter 11 bankruptcy was motivated by the company's desire to continue to provide its services uninterrupted and without losing any of its resources as it works to reorganize its management structure. 

The opportunity to remain in business through a corporate reorganization is why Chapter 11 bankruptcy may be so appealing to those companies facing financial struggles. Those wanting to seek such action may be wise to first consult with an experienced bankruptcy attorney. 

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