Bankruptcy Relief

More than a few Southern California residents went into a mild panic late last month when it was announced that the company that owns Roscoe's House of Chicken and Waffles had filed for bankruptcy. What did this mean for this beloved soul food destination?

Famous Patrons Include Snoop Dogg and President Obama

Roscoe's has been around for over 40 years. It has seven locations that serve chicken-and-waffle combos as well as popular southern fare like cornbread, grits and biscuits.

Celebrities including Magic Johnson and Snoop Dogg have helped make Roscoe's iconic in the Southland. The name is also known wore widely from media references. President Obama even stopped in for a visit during a trip to California.

Did Discrimination and Wrongful Termination Judgment Spur Filing?

So why has East Coast Foods Inc., Roscoe's parent company, filed for Chapter 11? A look at their balance sheet is telling. According to the bankruptcy protection filing, East Coast Foods has debts of somewhere between $10 million and $50 million, with assets of under $50,000.

One of the company's largest unsecured creditors is a former employee who won a lawsuit last fall after he charged the soul food eatery with discriminating against African-American workers. He claimed that Latino employees were given better shifts and schedules, and that he was wrongfully terminated when he spoke out. He was awarded $3.2 million. Roscoe's is appealing the decision.

The plaintiff's attorney says that they are now taking action to collect on the judgment. He expressed concern that the company may be using the bankruptcy filing to evade paying his client.

One bankruptcy attorney not involved with either legal action has speculated that there's more to the Chapter 11 action than the lawsuit. He says that the judgment wasn't "a big number for a large restaurant chain" and that something else may have precipitated this filing.

How Can Chapter 11 Help?

Speculation like this is not unusual when a company files for Chapter 11 reorganization. People often hear the word "bankruptcy" and assume that a company is going out of business. This can make recovery from financial problems more challenging.

However, Chapter 11 provides a way for a business to continue to operate and pay its employees while resolving its financial issues. With experienced bankruptcy attorneys and other professionals providing guidance, a company can come out of Chapter 11 stronger than ever.