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The Bankruptcy StrategistFeaturesBankruptcyLitigation

Pandemic Forces Small Restaurants to Make Tough Bankruptcy Choices

By Andrew C. Kassner and Joseph N. Argentina Jr.
February 01, 2021

The 2020 pandemic and resulting economic upheaval has left many sectors of the economy — and employees and others who depend on them — in distress. Others have navigated the current environment better than expected. For example, for operators of hospitality businesses, it has been one reality; for video-conference companies, it has presented an opportunity. Perhaps no sector has been more challenged than the restaurant industry. And, as is often the case, these difficult situations and the resulting tough choices must be addressed in the bankruptcy system.

While most media attention has been reserved for large economic retailers like Neiman Marcus and J.C. Penney, and large restaurant chains, today we report on a small restaurant chain and the choices that it had made.

In In re The Krystal Co., Case No. 20-61065-pwb, Bankruptcy Judge Paul W. Bonapfel of the U.S. Bankruptcy Court for the Northern District of Georgia addressed objections by individual employees and trade creditors to dismissal of a Chapter 11 case after the debtor's assets were sold with court approval in an effort to keep the business operating, albeit on a smaller platform. The objectors would not receive any recovery on their claims regardless of what happened in the case. Bonapfel's opinion explains, in layman terms, how the system produced this outcome.

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