In early 2025, two iconic American retailers—Joann Fabrics and Rite Aid—re-entered Chapter 11 bankruptcy protection, marking the second time each has done so in less than two years.
These high-profile refilings have cast a spotlight on a growing phenomenon in the retail sector known as “Chapter 22.” This unofficial term refers to companies that return to Chapter 11 shortly after completing a previous restructuring—a clear indication that the initial turnaround failed to fix deeper structural problems or was overwhelmed by ongoing market challenges.
Joann Fabrics, a pillar of the crafts community since 1943, filed for its second Chapter 11 in January 2025 after having eliminated over $500 million in debt just the year before.
Despite those efforts, the company succumbed to reduced foot traffic, supply chain disruptions, and an increasingly digital marketplace. In May, Joann confirmed it would close all 545 of its remaining stores, signaling the end of an 80-year run.
Rite Aid followed a parallel path.
After an October 2023 bankruptcy filing aimed at slashing debt and settling opioid-related litigation, the drugstore chain again turned to Chapter 11 in May 2025. Burdened by stiff competition, low-margin operations, and legal battles, Rite Aid announced it would close or sell all 1,240 of its locations nationwide.
The rapid unraveling of these two brands underscores the dangers of incomplete or misaligned restructurings.
Understanding Chapter 22 and Its Pitfalls
Chapter 11 bankruptcy, under U.S. law, is intended to give companies breathing room to reorganize their debts while continuing operations. A successful Chapter 11 exit typically involves renegotiating debt, trimming unprofitable locations, and implementing new business strategies.
However, when a company returns to bankruptcy court within a short timeframe—often less than two years—experts label it “Chapter 22,” a tongue-in-cheek reference to the failure of the first plan to deliver sustainable recovery.
Unlike Chapter 7, which is a liquidation process, or Chapter 13, designed for individuals with regular income, Chapter 11 is built for corporations seeking to restructure.
In a Chapter 22 scenario, the second filing often comes with more urgency, tighter creditor terms, and fewer options, as confidence in the company’s future has already been shaken.
Why Retailers Fall Back Into Insolvency
Chapter 22 cases typically stem from flawed or incomplete restructuring strategies. Some companies fail to address fundamental operational weaknesses—such as uncompetitive pricing, poor inventory management, or outdated store formats—during their initial bankruptcy. Others emerge with overly ambitious revenue projections or continue carrying unsustainable levels of debt.
Macroeconomic pressures, such as inflation and shifting consumer behavior, also play a significant role. The accelerated shift to e-commerce, labor shortages, and rising logistics costs have added to the burden.
Retailers with legacy infrastructure often find themselves ill-equipped to adapt, even after shedding liabilities through bankruptcy.
Party City, Boxed, and the Broader Pattern
Joann and Rite Aid are far from alone. Party City entered Chapter 11 in January 2023 in a bid to restructure its debt and streamline operations. Despite these efforts, the party supplies chain filed for bankruptcy again in late 2024 and began closing its remaining 700 stores by February 2025, resulting in the layoff of thousands of workers.
Online bulk retailer Boxed Inc. filed for Chapter 11 in April 2023, citing over $190 million in liabilities. While it had once been hailed as a potential digital challenger to Costco, Boxed shuttered its retail operations and sold off its software platform to satisfy secured lenders.
These cases further reinforce the difficulties of survival after an initial bankruptcy, especially in a rapidly evolving retail ecosystem.
Receivership Abroad: An International Parallel
Outside the United States, similar scenarios unfold under different legal structures. In countries like Canada and the United Kingdom, businesses in distress may enter receivership.
Unlike Chapter 11, receivership often strips company management of control and places a court-appointed receiver in charge of assets, primarily for the benefit of creditors. While the goal is still debt recovery, this process places less emphasis on preserving business continuity and more on maximizing asset value.
These international frameworks may differ in process, but the outcomes often mirror those of Chapter 22 in the U.S.—closures, job losses, and permanent exits from the marketplace.
Lessons for Retail Leadership in a Shifting Landscape
The recent wave of Chapter 22 filings in the retail sector reveals a sobering truth: emerging from bankruptcy is no guarantee of survival. For restructuring to be effective, companies must go beyond financial engineering. They must confront core strategic challenges—digitization, customer engagement, supply chain modernization—and develop models that can withstand ongoing disruption.
Retail executives must also manage stakeholder expectations and resist the urge to exit bankruptcy with overly optimistic forecasts. Investors and lenders are increasingly wary of second chances, and employees and customers are quick to lose confidence in struggling brands.
Ultimately, Chapter 22 is not just a financial event; it’s a strategic failure. And in today’s unforgiving retail landscape, there may be no third chance.
