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NHL farm team declares Chapter 7 bankruptcy

A minor league affiliate to a major National Hockey League franchise has been forced to shut down following a cancellation of their 2014 season. Michigan hockey fans may be familiar with a farm team known as the Trenton Titans, which filed for Chapter 7 bankruptcy on March 11. The team's parent company, Blue Line LLC, was responsible for the filing, which was overseen by a federal Bankruptcy Court in the team's home state.

The paperwork suggests the team is facing to the tune of $500,000 in liabilities against no liquid assets. This means the company will be liquidating to shore up the difference for the benefit of existing creditors. Creditors include several big-name NHL teams as well as a number of customers who had purchased season's tickets to the team's games.

Included among the creditors are two entities suing the team for alleged breach of contract, a marketing company and the team's former coach. These two may be the creditors owed the most money by the team. Given the minimal assets represented, the court will likely need to determine which creditors are entitled to preferred status when the time comes to liquidate and to apply the proceeds to paying down debt.

When faced with a challenging financial position, sometimes the best decision a business owner can make is to file for Chapter 7 bankruptcy. While other forms of bankruptcy exist, Chapter 7 often results in a discharge of many -- if not all -- of a company's financial obligations under the supervision of the Bankruptcy Court. Michigan business owners facing similar struggles may benefit from researching their options under state bankruptcy law.

Source: The Wall Street Journal, Trenton Titans, the Flyers Farm Team, Folds in Chapter 7, Stephanie Gleason, March 21, 2014

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