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38 Studios seeks Chapter 7 bankruptcy protection

South Carolina business owners struggling with debt likely agonize over the decision to file for bankruptcy. However, for some companies, this type of filing can be the only way out and may actually be a positive solution.

After weeks of speculation about the fate of 38 Studios, the video game company has filed for Chapter 7 bankruptcy. The filing comes after owner and former MLB star Curt Schilling finally gave up on finding a solution to solve his overwhelming debt load. The law firm representing Schilling stated the management and owners of the company have decided to file Chapter 7 after they were unable to secure capital or lure investors in to save the company.

The Chapter 7 filing indicates that 38 Studios has over 1,000 creditors including former employees, who are seeking more than $150 million in wages. The firm has listed its assets at only $22 million, potentially dashing creditors' hopes of being paid. Three companies affiliated with 38 Studios have also declared bankruptcy.

One of 38 Studios' largest creditors is the state of Rhode Island. The company owes the state $115.9 million, a staggering sum that, although they are first to be repaid from the asset liquidation, will likely never be paid back in full. Rhode Island lured 38 Studios away from Massachusetts with a $75 million loan for a promise to bring 450 jobs to the state. However, the plan fell flat and all of the workers at 38 Studios are now out of jobs.

South Carolina readers may be aware that this Chapter 7 filing signals a difficult end to what was once a promising venture. Nevertheless, the filing likely offers welcome help to the company, while it sorts through its obligations and relies on the protection of the bankruptcy court trustee to marshal available assets and supervise liquidation. In this manner, those who have worked to create success for 38 Studios may well have the opportunity to start over in another venture that also takes advantage of the substantial experience and industry know-how already gained.

Source: Boston.com, "38 Studios files for bankruptcy," Todd Wallack, June 8, 2012

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