The downturn in the economy has hurt many consumers, which in turn has had a negative effect on some lending businesses, as people no longer have the money to pay back their loans.
Recently a finance company, which focuses on making small loans to consumers, filed a petition in court seeking protection under Chapter 11 of the bankruptcy law. The company, The Money Tree, Inc., has a number of locations in Florida, as well as several other states.
The company is seeking to restructure itself and close approximately half of its less viable locations.
Before this bankruptcy filing, the company had been struggling for some time, and even several months ago started a restructuring plan in order to merge offices and reduce overall costs.
The bankruptcy was attributed to the recent growing inability of many consumers to meet their loan obligations, as well as the overall poor state of the nation's economy. According to the Chapter 11 bankruptcy filing, the company has approximately $71 million in debt.
The Money Tree grew exponentially since its founding in 1987, opening numerous branches in southeastern states, including in Florida. However, the aftermath of Hurricane Katrina, coupled with the economic decline starting in 2007, severely hurt the company financially.
While the company stated that it is filing for Chapter 11 bankruptcy with much regret, from a logistical standpoint, it appears that filing for bankruptcy is probably in the company's best interest as it will make debts more manageable, while possibly improving business liquidity, without having to completely close all locations.
Source: The Atlanta journal-Constitution, "The Money Tree Inc. seeks bankruptcy protection," J. Scott Trubey, Dec. 20, 2011