Heralded visual effects firm files for bankruptcy protection

One of the most famous visual effects companies in the entertainment industry has fallen on hard times. After laying off 200 employees, Rhythm & Hues — which did work for the film “Life of Pi,” which is up for an Oscar for best visual effects — has taken another step towards securing its financial livelihood by filing for bankruptcy protection. Rhythm & Hues is not the only visual effects company to struggle. In fact, numerous such companies have either disappeared or sought bankruptcy protection.

So why the sudden dearth of visual effects companies? Overseas competition has heated up, and companies here are struggling to compete.

It is the nature of business — competitors or other economic factors can dramatically change the financial realities of a company. The debts they owe and the bills they have to pay to make their organization function suddenly become incredibly difficult to pay. But they have to keep operating, and they have to try and make things work: so what can they do?

A Chapter 11 filing is the answer to many financially-crippled companies’ problems. This bankruptcy filing allows the organization to reorganize its debts in a way that allows it to realistically pay them off. Without the protections offered by a Chapter 11 filing, a business will deal with harassing creditors and legal pressure that threaten the business’s ability to effectively pay off its debts. Discussing things with an experienced lawyer is one of the best ways for a struggling business to efficiently and effectively get out of financial trouble.

Source: Los Angeles Times, “Rhythm & Hues to file for bankruptcy protection,” Richard Verrier, Feb. 11, 2013

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