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Chapter 7 upends Jersey City children's gym

The ongoing recession that began in 2008 continues to hit our communities hard. Small businesses in New Jersey, especially those offering so-called nonessential products and services, have had their share of struggles trying to survive in a down economy. These types of commercial entities that rely on people with expendable incomes have understandably had a difficult time trying to balance their own budgets and pay their own obligations. The result is that some, like one small operation in Jersey City, have turned to Chapter 7 bankruptcy protection as a means of confronting their financial problems and planning for a fresh start.

JoJo Productions operated The Little Gym of Jersey City franchise as a children's gym in Hudson County. Unfortunately, like many smaller companies still adrift in the sluggish economy, the company was apparently not able to keep current with its obligations. To that end, the New Jersey franchise shut its doors and filed for Chapter 7 relief on Feb. 6.

JoJo Productions requested bankruptcy liquidation under Chapter 7, meaning that its assets will now be liquidated to satisfy outstanding obligations. Its petition listed approximately $50,000 in assets as against debts between $100,000 and $500,000. Parents who paid tuition for future classes were not listed as creditors in the petition and that issue may be addressed before the bankruptcy court. Meanwhile, the franchisor, The Little Gym, indicated that parents could enroll their children at other franchise operations at no expense as long as there was sufficient space available.

While it remains to be seen what the result of the bankruptcy filing will be, the procedure will allow for the business to address its financial problems under the supervision of the court. The court typically determines which creditors are entitled to payment from the petitioner's assets, as well as the designated amounts. By proceeding in this manner, the New Jersey company will gain some much-needed breathing space as it strives to close its business in an orderly fashion while also creating a path to a brighter future.

Source: The Jersey Journal, "Surprise closing at gym leaves kids upset and parents losing fees already paid," Summer Dawn Hortillosa, Feb. 21, 2012

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