Pawn America, the largest pawn shop chain in the Upper Midwest, has filed for Chapter 11 bankruptcy. The bankruptcy comes after 26 years of operation in four states. According to the company’s bankruptcy filing, it owes somewhere between $10 million and $50 million to its creditors. Most of this debt is from the purchase of fixtures, furniture, and equipment used in its stores.
As we discuss in many bankruptcy blog posts, changing consumer tastes had an impact on Pawn America’s profitability in recent years. In Pawn America’s case, the company did make an effort to rebrand to appeal to today’s consumer. However, this effort was not enough for the company to overcome its debts. Chapter 11 bankruptcy is a form of bankruptcy available to businesses that want to continue to operate, but need to restructure in order to do so successfully. Like Chapter 13, Chapter 11 requires the filer to create a bankruptcy plan and have it approved by the court. In some Chapter 11 cases, companies are sold to investors. In many cases, bankrupt companies completely reinvent themselves in order to appeal to a new audience or cut out areas of operation that were not profitable. For example, a company might launch an ecommerce division as part of its plan to become profitable once again.
Internet Competition and Social Stigma Pose Challenges for Traditional Pawn Stores
In 2013, Pawn America opened a new retail concept in St. Paul’s East Side neighborhood. This store, known as PA Exchange, sought to shed the seedy image often associated with pawn shops by separating the retail section of the store from the financial area. With this setup, the company’s goal was to emulate other used good stores and reach a wider audience than it had previously reached.
The used goods market is a saturated niche. Websites like Ebay and Craigslist make it easy for individuals to sell their used goods at low prices by cutting out the middleman. This was cited as one of the reasons why PA Exchange was not successful. It can be difficult for a retailer that must purchase its inventory and sell it at a higher price in order to make a profit to compete with sellers on these platforms. When PA Exchange failed to reach Pawn America’s goals, it was closed.
Work with an Experienced Elk Grove Bankruptcy Lawyer
If you are considering filing for bankruptcy, speak with an experienced bankruptcy lawyer who can help you weigh the pros and cons of filing for bankruptcy in your case. Your lawyer might determine that you have other options, such as settling your debt with your creditors or creating an aggressive budgeting and repayment plan to work through your debt on your own. To have this conversation, contact our team of experienced bankruptcy lawyers at Newland & Newland, LLP today to schedule your initial consultation with us. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Parker Burchfield)