Once a company files Chapter 11 bankruptcy, it can sometimes pretend nothing has happened.

A lot of retailers operating under a Chapter 11 bankruptcy filing don’t mention it in their stores or on the homepage of their website. They continue acting as if nothing has happened because that’s what’s best for business.

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In many cases, however, that’s a bit like knowing you have a serious illness and not mentioning it to family and friends. Not talking about it does not make the situation go away, nor does it help you heal.

With a bankruptcy, however, the fate of a company hangs in the balance. It might be working on new funding or trying to sell the company to creditors who may continue to run it.

Forever 21 has been operating like that since it filed for Chapter 11 bankruptcy protection for the second time in March. The company has acted like it’s business as usual, and its website only mentions the filing on an interior page.

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The company even used its Facebook page to tease a future it likely does not have. It posted under the heading, “Hey Forever 21 Fam.”

“We know there’s been some buzz, and we want to clear things up. Forever 21 isn’t going anywhere, and we are still committed to bringing you the styles you love. Right now, we’re evolving, refreshing, and building what’s next,” it shared.

That sounds nice, but it does not reflect the company’s reality.

Amid bankruptcy, the fate of Forever 21 hangs in the balance.

Image source: Hanna Lassen/Getty Images

Forever 21 fights to survive   

While Forever 21 has been trying to convince its customers that things are fine, the company did file for Chapter 11 bankruptcy on March 16. It shared some information on that filing on a page on its website.

“In connection with the filing, we are beginning the process of closing a number of stores across the U.S. Importantly, however, our stores will remain open for the time being and we will continue to fulfill customer orders placed online. We also will continue to honor customer gift cards and store credit through and including April 15, 2025,” it posted. 

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The company also made some changes that are typical for a company being liquidated.

“All sales both in U.S. stores and the U.S. website are now final. Accordingly, we will no longer be accepting returns or exchanges. Additionally, at this point, we are no longer offering new gift cards or credit cards,” it added.

The chain has tried to be optimistic, as a buyer could emerge, or some new form of funding might help keep the company alive. It shared information on that as well.

“As part of our filing, we have requested to engage in a court-supervised marketing process for a going concern transaction or the sale of some or all of our assets. Decisions about which stores will ultimately close are ongoing, pending further discussions with landlords and potential buyers,” it shared.

Forever 21 moves toward liquidation

Forever 21 has been in a sort of bankruptcy limbo because its unsecured creditors objected to an arrangement that would have led to them receiving almost nothing from the chain’s liquidation. That changed on June 24, when judge Mary Walrath approved a new deal that would see those creditors receive more of the proceeds from a liquidation. 

“The repayment plan includes a settlement with lenders and former Forever 21 parent Sparc Group that’s designed to boost recoveries for unsecured creditors that stood to get pennies on the dollar. Sparc agreed to fully waive a $323 million claim that would have diluted any amounts received by unsecured creditors. They will get 70% of any net proceeds that F21 OpCo obtains during liquidation,” Business of Fashion reported.

That ruling clears the path for Forever 21 to move toward fully liquidating its assets and closing all of its stores.

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A buyer or savior could still emerge, but under the current process, the company will continue to be liquidated unless that happens. 

Authentic Brands Group (ABG) owns the Forever 21 brand, and its stores have been operating under a license. The bankruptcy process is only impacting U.S. stores, and there’s nothing preventing ABG from finding a new licensee after the current operator finishes its liquidation process.