To Bankruptcy and Back

The intimate story of one company that emerged from Chapter 11

Tweet

Few businesspeople understand Chapter 11. And very few companies, especially small ones, ever emerge from it once they've entered. Here, step by step, is the intimate story of one that did

Beth Bloom did not know what she was getting into. When she began dating Drexel Wright, in 1985, she was quite satisfied with the world she had built for herself. She was 29 -- the divorced mother of an 8-year-old son -- and working as assistant to the president of a good-size Pennsylvania construction firm. She enjoyed administrative work and was a natural at it. After some tough times following her divorce seven years earlier, Bloom felt that she finally had her life firmly under control. She had saved enough money to buy and renovate a house, and her future looked promising. "I had no intention of ever getting married again," she says. "I liked my life, and I liked my independence."

Enter Drexel Wright, age 38. Genial and charming, Wright was the founder and sole owner of Quaker Siding Co., a small, fast-growing construction and remodeling business in tiny, rural Millville, Pa. The father of two school-age children, he was separated from his wife and in the process of getting a divorce. Bloom's brother, who was also in the construction business, introduced her to Wright -- and they quickly fell in love. "Drexel pulled the rug right out from under me," she recalls. "We met in May, and by July we knew we were going to be married."

There was just one problem: Wright's business was in serious financial trouble. After months of agonizing, Bloom decided in December 1985 to quit her job and move to Millville -- to run the office of Quaker Siding. She hoped her administrative bent, combined with Wright's knowledge of sales and operations, could pull the company through. Instead, the couple, who married in early 1987, found themselves mired in a legal process from which few small companies ever emerge: Chapter 11. Here, in her own words, is Beth Wright's story.

Those first few months were the most difficult for me. I came into an unfamiliar situation with problems everywhere -- and I didn't know where to start. I tried to salvage relationships with creditors, but things had gone too far: most of the accounts were at least 120 days past due. Creditors were constantly calling, saying, "Where's my money? I'm going to file a lien. I'm going to call the sheriff." The phones were ringing all the time, and the stress was unbelievable.

I quickly discovered that the company had no management structure. Drexel is a highly talented salesperson and craftsman, but he lacked financial and administrative skills. That hadn't been such a liability when he had run a small remodeling business. However, by 1984, Quaker Siding had grown to nearly $1 million in sales and was diversifying into new construction. Because he wanted to keep growing his company, Drexel had started an extensive training program. In 1985 he doubled the size of the staff, to 32 employees.

By that time Quaker Siding had obvious problems. Drexel was generating a great deal of business -- but no profit. The company had assumed way too much overhead. However, Drexel was too busy to realize that. All he could see was a lot of business coming in.

When cash got tight, Drexel tried to pacify his suppliers and pay his employees. He stopped making tax deposits and used that money to pay suppliers. He'd tell himself, I'll use these funds today and replace them tomorrow. However, when you're not making a profit, there's no money to put back. He soon owed more than $75,000 in back taxes.

By the time I arrived, in December 1985, the business was in serious trouble. I had to fire people, cutting the staff from about 32 to 25. That was difficult; many of the employees were Drexel's friends.

Every area of the business was out of control. The financial statements were poorly prepared and inaccurate, the checking accounts unbalanced and overdrawn. I hired a new accountant, but it took two to three months before we had a bookkeeping system that gave me useful information. Only then could I begin tracking the company's financial performance.

Everything was overwhelming. I had worked in the executive suite of a big company, so I was completely out of my element. I was used to being handed reports; now I had to compile the reports myself. I was used to an office full of sophisticated equipment; now every time I needed a photocopy, I had to walk to the town pharmacy.

I had no experience managing a business, so I knew I couldn't do this job myself. What I needed was help from the best, most competent people I could find. I called the accountant my previous employer used and asked his advice. I called all my business associates. I spoke to an excellent bankruptcy lawyer. I talked to people at the local universities. I called SCORE [Service Corps of Retired Executives]. I tried to get as much free information and help from people as I could. I read everything I could get my hands on.

The Internal Revenue Service was our largest creditor, and we wanted to negotiate some type of payment plan with it. Had we been successful, I think the suppliers would have worked out payment terms with us, enabling us to avoid bankruptcy. We were in contact with IRS representatives right up until we filed, but they wouldn't negotiate. Finally, in July 1986, I went down to the local IRS office. The agent handling our case just looked at the file and told me, "I don't want this file on my desk any longer. I want to move this case off my desk."

 1 | 2 | 3 | 4 | 5 | 6  NEXT 

Sign-up for our Innovation Newsletter

Email Address: