We talk a lot about how bankruptcy provides people and organizations a chance to hit the reset button. But it is often difficult to find an example to illustrate what we are talking about because most people and businesses doesn’t want to share the gritty details of their finances with the public. So, it was exciting to read the recent Journal Sentinel story about the Milwaukee YMCA’s bankruptcy because it is the perfect example of how an organization can use bankruptcy to get a new lease on life.
The YMCA’s Bankruptcy
In 2014, the Milwaukee YMCA filed Chapter 11 bankruptcy. At the time, the Y was around $30 million in debt due to a building spree started in the 1990s. Donations were declining, and the number of members kept falling, particularly after the 2008 financial crisis.
Filing bankruptcy allowed the Y to sell off properties and right-size its workforce. The organization sold 8 of the 11 properties it owned, many of which were in the suburbs not Milwaukee proper. It also downsized from 365 full-time employees and 1,271 part-time workers to 140 full-timers and 580 part-timers.
If it had not filed for bankruptcy, the 155-year-old institution would have had to close. Because it filed for bankruptcy and took full advantage of the bankruptcy system, it had a budget surplus of around $650,000 in 2016, and it has a new plan for how to best serve the Milwaukee community.
Some Takeaways For The Rest Of Us
It would have been a real shame if the Milwaukee YMCA had closed. It’s not just a gym, it’s a modern-day piazza, a place where people can mix and mingle and grow the collective soul of our community. That is one reason why it is great that they chose to file for bankruptcy under Chapter 11.
Chapter 11 is often called a reorganization bankruptcy because the focus is not on shutting things down, but preserving what can be saved and setting the organization, or family, up for success in the future.
It is important for anyone who is filing under Chapter 11 to be willing to take a long, hard look in the mirror and decide what is important to them going forward. The Y had opened too many branches and was offering too many services. These properties were valuable assets though. Once the organization decided it needed to refocus its operations, selling off some properties allowed it to reinvest in the properties it was keeping.
Chapter 11 filers need to be willing to make tough decisions that allow them to move forward, and this typically goes beyond finances. Oftentimes the filer needs to do some soul searching to determine if the path they are on is just unusually rocky but will smooth out, or if it is a road to ruin. Bankruptcy is an opportunity to hit the reset button in a very broad sense, not just financially.
A lot of people think that filing for bankruptcy is the beginning of the end, but that is simply not true. As the success of the Milwaukee YMCA illustrates, bankruptcy can provide an opportunity to refocus, refresh, and come back stronger than before.