Not all bankruptcies occur amicably or voluntarily. The Avantair bankruptcy is a glowing example. In this case Avantair had to file what is referred to as an “involuntary Chapter 7 petition.” Involuntary bankruptcies are generally filed by creditors against businesses as a means of protecting their interests. If a company has assets it can use to pay off debt but is not paying its debts, this is a way that creditors can secure payment.
This is what happened with Avantair. An involuntary Chapter 7 petition was filed in the Tampa, Florida Middle District U.S. Bankruptcy Court and went uncontested after the August 13, deadline. The chain of events leading up to the filing actually began weeks earlier. On July 25, the petition was filed by four of Avantair’s creditors in Texas. After several moves in the deadline date, Avantair had until August 13 to respond.
Steven Santo, Avantair’s CEO said on August 7 that the schedule was affecting the company’s efforts to secure the necessary financing. He also stated that he was hoping to reorganize under Chapter 11 but that plan never materialized. In the end, the company’s silence was the decision-maker.
Creditors Secure Avantair Assets
Two of Avantair’s creditors were granted their requests. The judge in the case, Catherine McEwen grated a request securing business records and assets, which began the process of the sale of assets to pay the debt. These assets included aircraft, which was a major sticking point for some of Avantair’s shareholders who were also struggling to secure possession of their planes and their maintenance records.
Things were not looking good at all for Avantair, and their handing of the situation started getting worse. When Beth Ann Scharrer (the court-appointed trustee representing the creditors) arrived at Avantair headquarters in Clearwater, FL with the purpose of securing the premises. Most of the doors were unlocked, the offices had been cleaned out and there was evidence that employees who had supposedly been furloughed had actually been onsite only hours beforehand.
Within two days, Scharrer had all the locks changed and had all employee security ID cards invalidated. Judge McEwen issued an order of limited access to the facility which allowed only Scharrer, her selected counsel and agents authorized by her on the property at all. On August 16, Avantair was given seven days to comply with an order to hand over a their list of creditors, unexpired leases and co-debtors. As of now, Avantair has until December 18 to file their bankruptcy claim. Beth Ann Scharrer is currently in the process of ensuring that the company’s assets are secured and accounted for.
Bankruptcy is not always amicable and it is sometimes the only way to save assets. One thing is for sure no action and silence is not golden when it comes to dealing with creditors and a possible reorganization. Without proper planning and action, it can be devastating. This case only proves the point that not only can anyone or any company find themselves faced with filing bankruptcy, but it is sometimes unavoidable. In those instances, taking necessary action is the best way to protect your interests.