As the coronavirus pandemic wages on, 24 Hour Fitness, a popular gym chain, has filed for Chapter 11 bankruptcy. The company will be closing over 130 locations in Texas, California, and in several other states. The gym chain operates over 300 locations across the country. 24 Hour Fitness is the second national gym chain to file for bankruptcy since the beginning of the coronavirus pandemic.
Gyms are Struggling to Stay Open
Gyms across the country have been hit incredibly hard by the coronavirus. While many states have allowed restaurants and bars to reopen while following strict guidelines, many gyms have been forced to stay closed. The CEO of 24 Hour Fitness recently stated that if it was not for the coronavirus pandemic, their company would not be filing for Chapter 11 bankruptcy.
The Chapter 11 Bankruptcy Process
24 Hour Fitness will not be going out of business entirely. Instead, it will close over one-third of its locations. The company plans to reopen its remaining gyms in phases. It plans to reopen the majority of its locations as soon as possible. As part of the company’s bankruptcy plan, it will allow customers to work out in any one of its remaining 24 Hour Fitness locations.
The company has stated that it will combine a loan of $250 million with cash generated from its remaining gyms to keep its facilities open throughout the Chapter 11 bankruptcy proceedings. 24 Hour Fitness expects to keep paying wages and benefits for staff members.
Bankruptcies are on the Rise
Recent financial data shows that 722 companies filed for bankruptcy in the U.S. in June. The amount of filings increased by 48% from the same time period last year. Specifically, filings for Chapter 11 bankruptcy increased in March and April, largely due to state-imposed restrictions during the coronavirus shutdown. Gold’s Gym has also filed for bankruptcy.
What Happens When a Company Files for Chapter 11 Bankruptcy in California?
Chapter 11 bankruptcy allows a company to reorganize its debts, assets, and business affairs. Businesses usually file for Chapter 11 bankruptcy when they need time to restructure their debts. Large national companies file for Chapter 11 bankruptcy along with smaller companies.
When a company files for Chapter 11 bankruptcy, the assets of the business will remain protected while the company negotiates the terms of the restructuring. Filing for Chapter 11 bankruptcy also allows the company to engage in an orderly liquidation of assets, or to sell assets. In some cases, bankruptcies start out as Chapter 11 reorganization bankruptcies then convert to become Chapter 7 bankruptcies, also known as liquidation bankruptcies.
Contact Our Experienced Los Angeles Bankruptcy Lawyers Today
We understand the challenges that businesses are facing during the coronavirus. If you are considering filing for bankruptcy and you would like to explore your options, our Los Angeles bankruptcy law firm can help. Contact our Los Angeles bankruptcy law firm today to schedule your initial consultation.