Air America Radio, a radio network that was launched in 2004 was abruptly shut down after experiencing severe financial troubles. The left leaning radio network, which owned 100 radio outlets nationwide, filed Chapter 7 bankruptcy so that it can be liquidated to repay creditors.
"The very difficult economic environment has had a significant impact on Air America's business. This past year has seen a 'perfect storm' in the media industry generally," the company said in a statement on its Web site.
Bankruptcy has become a common move for many media companies during this recession. Sagging advertising revenue, low readership and in the case of Air America Radio, a lack of investor interest, has driven several media outlets to file Chapter 11 bankruptcy to restructure their debts or to liquidate in Chapter 7 bankruptcy. When a company files Chapter 7 bankruptcy they will cease operations, liquidate their assets and give the proceeds of that liquidation to creditors. Sometimes creditors prefer a Chapter 7 bankruptcy if they don't believe the company is viable. Secured creditors may favor Chapter 7 bankruptcy for companies because they are almost always guaranteed to get at least some of their loan repaid. But on the other hand unsecured creditors rarely see much repayment when a business files Chapter 7 bankruptcy.
While Chapter 7 bankruptcy may seem abrupt to outsiders, usually companies who file Chapter 7 bankruptcy have a long history of financial troubles that they have not been able to overcome. For example, Air America had financial troubles almost from the day it was launched and even filed a Chapter 11 bankruptcy in 2006.