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A Brief Look at Some of History's Biggest Business Bankruptcies

written by: •edited by: Michele McDonough•updated: 12/6/2011

What are some of the mega giants who have lost it all in bankruptcy filings? Here, we’ll take you through a pictorial look at ten of them with a synopsis on what went wrong with each. Bankruptcy is never fun, but maybe some of these companies should have seen it coming.

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    Chrysler Went Down and Came Back - Twice!

    Chrysler Went Down and Came Back - Twice! 

    The Chrysler name has been under many ownership umbrellas and went from simply the Chrysler Corporation to DaimlerChrysler Motors Company, LLC. After filing for Chapter 11 bankruptcy, it's now the Chrysler Group, LLC.

    Back in 1979 when Lee Iaccoca was still around, even though the U.S. Government offered up $1.5 billion in bailouts, Iaccoca was a smart guy and sold the K-Car like hotcakes, introduced the minivan and the rest was history.

    The second bailout in 2009 which caused the Chapter 11 and massive dealership closures cost taxpayers around $1.3 billion, which will never be paid back.

    The Italian auto maker Fiat now owns the largest percentage of this American company at 53.5 percent (they purchased the UAW and Canadian interests as well).

    Who knows what lies in the future for Chrysler but many political leaders at top levels feel the restructuring was a success, especially since Chrysler sales were up in the second quarter of 2011 (+24.30 percent). Now if we could just get the horns on these new Chrysler vehicles to say ciao.

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    General Motors Needed Some Bailing Out Too

    General Motors Needed Some Bailing Out Too 

    Why not follow Chrysler and file for bankruptcy protection, too, said top leaders at General Motors back in 2009. When things looked bleak in late 2008, President Bush offered up $9 billion to save GM. But when President Obama took office, he forced out the CEO (Rick Wagoneer) and told them to choose Chapter 11 Restructuring or get out of the car game.

    Things went well and although General Motors was once the largest automaker ever from 1931 to 2008 (when Toyota surpassed its sales), things are looking up because today's GM is a leaner company. Models such as Saturn and Hummer were faded out and you can't argue with a 11.6 percent increase in earnings in the second quarter of 2011.

    Still, the U.S. government owns around 61 percent of General Motors so expect those cars rolling out of factories to be of the red, white and blue variety!

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    Mervyn's Department Stores Choose Chapter 7

    Mervyn's Department Stores Choose Chapter 7 

    This 59-year old California-based retailer started seeing problems in 2007 but when a Chapter 11 didn't work in early 2008, top leaders filed for Chapter 7 protection and closed 26 stores in July of 2008. The remaining 149 stores were closed after the holiday shopping season in 2009.

    There were some unaware customers who did buy gift cards to Mervyn's. Believe it or not, they sold them, knowing they would be closing down. The U.S. Bankruptcy Courts did allow them to honor their gift cards, but most sought out websites like Gift Card Exchange.

    Shoppers liked Mervyn's as it was considered a step up from the Big Box chain stores out there. But when the economy goes down, it really doesn't matter what you're selling. Rumors (and yes we couldn't verify them) say the former owners of Mervyn's bought back the intellectual property rights - will Mervyn's be an online store? We'll have to wait and see.

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    Linens 'n Things Stops Selling Things

    Linens 'n Things Stops Selling Things 

    This home decor retailer filed for Chapter 11 in May of 2008 and by doing so phased out all brick and mortar stores - approximately 600 stores. Back in 2008, Linens 'n Things employed 17,000 full and part-time people. However, the company's assets were purchased by LNT Acquisitions in a deal struck in early 2009 and now the retailer is an online venue only (LNT.com).

    The home decor business is fierce and when the downturn in the economy hit, people turned to lower priced stores such as Target and Wal-Mart to buy needed sheets, towels and bedding. There's also the competitive Bed, Bath and Beyond.

    This is one case where instead of opting for the end, or Chapter 7, a brick and mortar store is trying to come back via their online sales. Will it work? Hmm? Ask Amazon! The end results will be how well they can brand their online presence, so stay tuned.

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    Enron Becomes a Major Scandal

    Enron Becomes a Major Scandal 

    A list of big business bankruptcy filings wouldn't be complete without a mention of the disgraced Enron. On July 7, 2004 the now infamous Kenneth Lay of Enron surrendered to federal agents on charges of sham transactions and inflating the company's stock price - he plead not guilty.

    Next the bankruptcy courts approved Enron's plan allowing the company the attempt to repay creditors (even if it was only 20 cents on the dollar).

    Still later, things got even worse for Enron when the feds ordered them to pay around $32 million in profits they made in energy-trading venues.

    In 2006, both Jeffrey K. Skilling and Kenneth L. Lay, the top dogs of Enron were convicted. Months before Lay's sentencing he died while vacationing. Skilling is now serving out a 20+ year sentence (maybe there's hope for early releases for good behavior) but to most Americans, these two were greedy CEOs who thought they could manipulate the system. Thank goodness they failed.

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    Pacific Gas and Electric Runs Out of Gas

    Pacific Gas and Electric Runs Out of Gas 

    Pacific Gas and Electric (PG&E) felt their way out was not bailout help, but Chapter 11 back in April of 2001. This third largest bankruptcy filing ever, and the largest for a utility, came as a shock to then Governor Gray Davis. The utility had been in bailout talks with the California government but sought relief from its creditors via the bankruptcy filing.

    While the utility company remained open and did continue to provide service, most Californians were angry this big business could simply file for protection, skip the liabilities and the service customers did get was poor at best.

    PG&E did emerge from Chapter 11 in 2004 and did pay approximately $10.2 billion to its creditors but these days, requests for rate hikes don't come too often in fear of government turn-downs.

    In any event, they did emerge from restructuring and again, was this just another way for big business to write off debts they couldn't pay? Boy, the average consumer would love to do that and still be able to retain the same style of life.

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    Blockbuster Video Goes Bust!

    Blockbuster Video Goes Bust! 

    It was tough for the DVD and game video rental company Blockbuster to compete with venues like Netflix and Redbox. Even worse, with so many satellite and cable companies offering on-demand videos, this mega giant sought protection under Chapter 11 in September of 2010. All is not lost, however, as DISH Network purchased Blockbuster in April of 2011 for approximately $230 million (they also had to take on around $90 million in old unpaid liabilities). In the third quarter of 2011, new owner DISH starting promoting its acquisition of Blockbuster in their commercials. Here's hoping one company purchased by another saved some jobs!

    Only time will tell on how well the DISH/Blockbuster marriage will work but DISH is pretty popular with its customers so this was probably a good move.

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    K-Mart Turns Off the Blue Light

    K-Mart Turns Off the Blue Light 

    Even after K-Mart filed for Chapter 11 bankruptcy restructuring in 2002, by 2004 its balance sheet must have appeared pretty positive as it bought up Sears. Both are now under the Sears Holding Company umbrella.

    The restructure did hurt many employees - K-Mart closed about 300 stores and 34,000 employees lost their jobs.

    Today's K-Mart may still offer their famous blue light specials but their new logo of lime green, white and grey does reflect some "Sears" behind it.

    Kudos to Sears for making a bad CEO (Chuck Conaway) step down, pay back debts for using company funds to buy boats and take expensive trips—and coming out of it all with flying colors!

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    Books Without Borders

    Books Without Borders 

    Not to compare this bookstore to "Doctors without Borders" but its problems began to go south when it had problems competing with Amazon and Wal-Mart. The retailer filed for Chapter 11 bankruptcy protection in February of 2011 but the restructure process didn't work. With debts of approximately $1.29 billion in July of 2011, the retailer turned to the Gordon Brothers Group to liquidate its inventory (about $700 million).

    Sadly, the bookstore closures included all Borders locations, Borders Express and Waldenbooks. Those who held gift cards were able to use them during the liquidation and to cover unpaid debts. Even furniture, fixtures and equipment were auctioned off. RIP to this 40-year old chain.

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    The Lehman Brothers Leave

    The Lehman Brothers Leave 

    It was hard for this Wall Street firm to gain any sympathy when it filed for bankruptcy in 2008. It remains the largest bankruptcy filing ever - Lehman Brothers had $600 billion in assets, most of which were a result of the over-lending housing market and their acquisition of subprime mortgages.

    This mega giant could have saved itself if a buyer could be found, but it couldn't. Industry leaders like Barclays Bank and Bank of America didn't find the company's debt worth taking over.

    Some say Lehman brothers was the first giant to go and many others have come under much scrutiny by President Obama and his administration. Is Wall Street too greedy? Ask the Occupy Wall Street protestors!

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