Moribund retailer L. Epstein & Sons received permission yesterday to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code, according to Howard A. Rubenstein, the lawyer handling the filing for the discount department store.
Three creditors asked the bankruptcy court Tuesday to liquidate and distribute the assets of the 65-year-old Epstein chain under Chapter 7 of the code. Epstein had announced in January it would liquidate its remaining stores because of a poor retailing environment.
Gutman Realty Co., Dry Holdings Ltd. and Noe-Equl Hosiery Corp. are the creditors who filed the petition against the retailer, claiming they are owed more than $150,000 for rent payments and merchandise.
Yesterday's ruling by U.S. Bankruptcy Judge E. Stephen Derby gives Epstein the chance to design its own plan to pay creditors, Mr. Rubenstein said, rather than having an appointed trustee do it.
"We can have an orderly liquidation rather than an auction," he said.
An interim plan is already in effect, he said, and a more complete plan will be developed within two months.
The Epstein creditors could not be reached for comment, and one of their lawyers, Irving Walker, did not want to be quoted.
Epstein also was granted permission to pay its 100 employees for the pay periods that were missed because of Tuesday's filing by the creditors, which prevented Maryland National Bank from TC honoring workers' checks, Mr. Rubenstein said.
Since the retailer began liquidating, it has closed four of its seven stores.