San Jose Orchard Supply Hardware Files for Bankruptcy

Many individuals dream of owning their own business. They want the freedom to be their own boss and the ability to grow and expand at whatever rate works for them. But when there is a change in the economy, many businesses may face financial hardship. This may be so serious as to require the owner to file for business bankruptcy.

The San Jose based home improvement chain, Orchard Supply Hardware, filed for Chapter 11 bankruptcy protection recently. The filing includes a deal that may sell 60 of its 91 stores to Lowe's.

If the deal goes through, Lowe's may continue to operate the stores as a separate business while keeping the Orchard name. The agreement hinges on Lowe's winning the bankruptcy auction.

Orchard was founded in 1931. During the recession, annual sales dropped by more than 20 percent. Sales have begun to turn around but representatives from Orchard say that they remain burdened debt acquired during their spin-off from Sears in 2011.

Orchard stores average about a third of the size of Lowe's. Experts say that even if many of the stores aren't bought by Lowe's, the opening of that size real estate will be great for the market. There are many retailers that are in the market for property of that size.

Filing for Chapter 11 bankruptcy can put a stop to all creditor's actions including mechanics' liens and repossession. Bankruptcy allows a business to create a debt reorganization plan. This can allow reduced interest payments and reduced or eliminated penalties and fees.

Source: The Sacramento Bee, "Orchard Supply Hardware files Chapter11; Lowe's may buy at least 60 stores," Dale Kasler, Jun. 19, 2013

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