Close up of bankruptcy petition

We've talked here before about how businesses sometimes opt to file for Chapter 11 bankruptcy when faced with significant lawsuits. Last week, Gawker Media made that choice.

Decision Follows $140 Million Hulk Hogan Judgment

The company's namesake website has been involved in a high-profile court case with wrestler and TV personality Hulk Hogan over a private sex tape featuring Hogan that the site published in 2012. Hogan won the case in March and was awarded over $140 million. Hogan's case was revealed to have been funded by Peter Thiel, a Silicon Valley billionaire PayPal co-founder who felt he was targeted by Gawker at one time, both professionally and personally.

What does the bankruptcy filing mean for the judgment awarded to Hogan? Gawker says that it intends to appeal the verdict. Generally, when a company files for bankruptcy, its creditors, including litigants, receive only a portion of what they're owed. Hogan's attorney says his client intends to pursue the $140 million judgment "whether it be in the bankruptcy court or any other court."

Publisher Ziff Davis Is "Stalking Horse Bidder"

Gawker has already received a bid to buy the seven brands under its umbrella from tech publisher Ziff Davis. These include the websites Jezebel and Gizmodo. That bid is reportedly between $90 and $100 million.

Gawker will still be put up for auction by the bankruptcy court. However, Ziff Davis's bid makes it the "stalking horse bidder" that others would need to top. Any final sale must be approved by the New York bankruptcy court.

What's Next for Gawker?

Gawker and its brand of journalism are unpopular with many. Thiel has said that it has "built its business on humiliating people for sport." However, as New York Attorney General Eric Schneiderman tweeted after the bankruptcy announcement, "Freedom of the press is a cornerstone of our nation. Like them or not, sad to see NYC media giant @Gawker forced to the brink."

Gawker's management has assured employees that day-to-day operations will remain unchanged until a sale has been finalized. They say they want a buyer committed to continuing Gawker's work. The company's CEO and founder Nick Denton called potential buyer Ziff Davis "one of the most rigorously managed and profitable companies in digital media."

If a business is facing litigation that's threatening its ability to do business, an experienced bankruptcy attorney can provide guidance on whether Chapter 11 reorganization may be the right solution.

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