A bankruptcy entered into by a business occurs for the same reasons that an individual would file, for protection from creditors and a reasonable discharging of debts. For those companies who are facing an overwhelming amount of debt, Chapter 7 bankruptcy protection stops creditor actions immediately. If the company is still doing business when the filing is made, though, it could lead to work stoppages. This is the case in a recent bankruptcy, which has left Wisconsin schools looking for alternate sources of milk.

The bankruptcy of the Golden Guernsey dairy processing company in Wisconsin occurred after a 2011 purchase of the plant from an out-of-state private equity firm. According to the firm, the plant was struggling with debt due to a combination of expenses and pressure to lower prices.

The closure of the 83-year-old plant resulted in the loss of more than 100 jobs, as well as the stoppage of milk delivery to schools. According to state officials, the closure also violated Wisconsin state law, which required a 60-day notice on plant closures. A complaint was filed with the Department of Workforce Development by one of the former employees of the plant based on the failure to provide notice to the state.

Residents in the state of Wisconsin have a right to file for a Chapter 7 bankruptcy whether they’re filing personally or on behalf of a business. Once the filing is made, all creditor attempts to collect must cease as the case makes its way through the bankruptcy court, giving the filer an opportunity to cover as much of the debt as possible before having it dismissed by the court. While no one really wants to see a plant close, the fact is that could have been the outcome anyway.

Source: Associated Press, “Golden Guernsey files for bankruptcy protection,” Jan. 9, 2013