By Ted Gavin, CTP, NCPM, Managing Director & Founding Partner

There’s an old joke in the restructuring world: when a company files for Chapter 11 a second time, we call it a “Chapter 22”. Third time? “Chapter 33”. It’s gallows humor, but behind the joke is a serious truth — when companies fail to fix what’s broken, they’re often doomed to repeat the cycle. A friend and colleague of mine once represented the creditors’ committee in the last case of a Chapter 44.

And so here we are with Forever 21.

The fashion retailer, once a mall mainstay, has filed for bankruptcy *again*. It’s not the first — though since it’s liquidating, this might just be the one that sticks. After its initial Chapter 11 filing in 2019, Forever 21 was acquired out of bankruptcy by a group including Simon Property Group, Brookfield, and Authentic Brands. At the time, there was talk of a turnaround: better management, smarter retail strategy, a fresh start.

But there was a problem. No one changed the fundamentals of the business to be able to compete in the current market environment. And nobody should want to stay Forever 21 … forever.

Forever 21 continued chasing the same customer, operating the same bloated footprint, and relying on the same outdated supply chain and inventory model. In other words, it tried to dress up the same business in a new outfit — an outfit that came with one. point. five. billion. dollars. in debt — and hoped the problems wouldn’t notice. Meanwhile, their consumers flocked to fast-fashion giants Shein and Temu (“Premium fabrics, with no lead!”) instead of the mall.

Restructuring is more than a balance sheet. Bankruptcy can be a powerful tool. It can help a business shed liabilities, renegotiate leases, and buy time to reset. But it’s not a magic wand. If the underlying business model is broken, bankruptcy doesn’t fix it — leadership does.

To emerge successfully from Chapter 11, companies must do more than trim costs and hope for a rebound. They must rethink strategy. Who is the customer? What is the product? How does it get to market? What capital structure is sustainable going forward?

When those questions go unanswered — or worse, ignored — you get Chapter 22.

Forever 21’s story isn’t unique. It’s barely even a cautionary tale – but it is a cautionary tale. Boards and investors navigating financial distress need to ask: are we using bankruptcy to *transform* or just to *survive*? Because survival without change is just a delay — not a solution.

Restructuring is hard. It requires tough calls, a clear-eyed view of reality, and the willingness to break from the past. But it’s the only way to avoid the revolving door of repeat filings.

As for Forever 21 — maybe they next one will aim to be Forever Profitable.