Air America Bankruptcy

Air America Radio, a radio network that was launched in 2004 was abruptly shut down after experiencing severe financial troubles.  The left leaning radio network, which owned 100 radio outlets nationwide, filed Chapter 7 bankruptcy so that it can be liquidated to repay creditors.

“The very difficult economic environment has had a significant impact on Air America’s business. This past year has seen a ‘perfect storm’ in the media industry generally,” the company said in a statement on its Web site.

Bankruptcy has become a common move for many media companies during this recession.  Sagging advertising revenue, low readership and in the case of Air America Radio, a lack of investor interest, has driven several media outlets to file Chapter 11 bankruptcy to restructure their debts or to liquidate in Chapter 7 bankruptcy.  When a company files Chapter 7 bankruptcy they will cease operations, liquidate their assets and give the proceeds of that liquidation to creditors.  Sometimes creditors prefer a Chapter 7 bankruptcy if they don’t believe the company is viable.  Secured creditors may favor Chapter 7 bankruptcy for companies because they are almost always guaranteed to get at least some of their loan repaid.  But on the other hand unsecured creditors rarely see much repayment when a business files Chapter 7 bankruptcy.

While Chapter 7 bankruptcy may seem abrupt to outsiders, usually companies who file Chapter 7 bankruptcy have a long history of financial troubles that they have not been able to overcome.  For example, Air America had financial troubles almost from the day it was launched and even filed a Chapter 11 bankruptcy in 2006.

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