It can be challenging to keep a business afloat nowadays. Competition and mismanagement can quickly destroy a once-thriving company. Even schools can drown in debt, with bankruptcy the only viable option. This was the case for Tennessee charter school Boys Prep, which filed for Chapter 7 bankruptcy on Aug. 29.
Academic pressure and poor management led to the school's downfall. After netting $50,000 last year, the school ended up struggling with debt in 2014, already losing $130,000 so far this year. The school is no longer in operation. It shut down after the past school year amid low test scores, failure to properly manage special education students and exaggerated enrollment numbers.
Daymar Properties, a real estate company that owns the school's offices, is Boys Prep's biggest creditor. The school also owes money to RJ Young, an office supplier, as well as Pinnacle Bank, bus company Grayline and teacher training company Teach for America. Some of these debts, like the $15,000 owed to teach for America, will likely be written off.
Chapter 7 bankruptcy is a major decision. Companies facing financial challenges should opt for bankruptcy only as a last resort. It can help a company's short-term situation by keeping creditors at bay. Not only that, but this option can eliminate debt quickly -- in just a matter of months. However, a bankruptcy can affect one's image as well as credit score. There are limitations as to how often a person or company can file for bankruptcy. In addition, there are some debts that cannot be erased. There are pros and cons that should be carefully thought out before moving forward.
Source: Nashville Scene, "Boys Prep Files For Bankruptcy," Andrea Zelinksi, Sept. 18. 2014