Is Avon Going Out of Business?

Avon Products, the cosmetics giant and icon, has filed for Chapter 11 bankruptcy. Avon’s bankruptcy is tied to the talcum powder lawsuits. According to the Wall Street Journal, Avon has spent more than $225 million defending itself from lawsuits. Avon also has more than $1 billion in debt.

The lawsuits are related to Avon products, which contain talc and minerals that cause cancer, such as asbestos.  Johnson & Johnson recently settled their talcum powder lawsuits related to ovarian cancer for almost $9 billion.

Avon Files for Chapter 11 Bankruptcy

Because Avon filed for Chapter 11 bankruptcy, they are not going out of business. Had Chapter 7 bankruptcy been filed, Avon would have closed its business and liquidated all assets to pay its debts, including any lawsuit judgments.

Chapter 11 bankruptcy is similar to Chapter 13; however, while Chapter 11 can apply to individuals and businesses, Chapter 13 bankruptcy only applies to individuals. In my classes, I tell students that Chapter 11, while commonly associated with businesses, when it’s tied to an individual, it’s a high-wealth individual. That’s because there are debt and asset limits with Chapter 13.

Currently, if the secured debt limits exceed $1,395,87515 for secured debts and more than $419,2753 for unsecured debts, then Chapter 11 would be filed. There are no limits with Chapter 7 bankruptcy when it comes to secured or unsecured debts.

Unfortunately, it is common for corporations to file for bankruptcy when there are large settlements or judgments to pay. This could reduce the amounts plaintiffs receive. The silver lining in this dark cloud is that, at least with Chapter 11, Avon believes it produces sufficient revenue to reorganize its debt. Also, at least judgments will be repaid in part.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.