On behalf of Law Offices of Mark M. Kratter, LLC on June 14, 2012
Connecticut gamers may have already heard of the financial woes experienced by the video game company 38 Studios. Now, the company has sought Chapter 7 bankruptcy protection. It's owned by former Red Sox pitcher, Curt Schilling. Several factors weigh into any decision to declare Chapter 7 bankruptcy, but the company could not find a resolution to its current financial situation and has let all of its employees go.
The management and owners of 38 Studios decided to declare bankruptcy after Schilling had apparently given up a quest to obtain additional capital from the state in which it is located or any other investors in hopes to revive his company. The Chapter 7 filing signifies that the company will be liquidating its assets. The filing shows more 1,000 creditors that are still owed $150 million by the company, but the firm has estimated the company's assets at only around $22 million. This suggests that the majority of 38 Studios' creditors will go unpaid. Three companies affiliated with 38 Studios also filed for bankruptcy protection.
The financial woes for 38 Studios began with a $75 million loan from the state of Rhode Island. The loan was an attempt to lure the studio away from Massachusetts and bring jobs to the state of Rhode Island. Unfortunately, with the bankruptcy filing, there is a strong possibility that Rhode Island will lose much of its investment in the company.
While this company has some other issues it will have to deal with in the future, including a criminal investigation, many companies are able to find significant financial relief in bankruptcy. Running a business in a poor economy is no easy feat, as many Connecticut business owners know. Sometimes things don't go as planned. When that happens, bankruptcy can allow for a fresh financial start.
Source: Boston.com, "38 Studios files for bankruptcy," Todd Wallack, June 8, 2012
