On May 2, the Deseret News reported that Collett's Home Furnishings, Inc. had filed for Chapter 7 bankruptcy. The story noted that bankruptcy files indicated no assets would be available for distribution to creditors. It also stated that a Chapter 7 bankruptcy means Collett's will make no further attempt to pay creditors.
The statement in court files that said no assets were available for distribution to creditors was not asserted by Collett's or Collett's bankruptcy attorney, but rather by court personnel. Collett's attorney left the box next to the statement blank when he filed the bankruptcy document. Court personnel later marked "no."Under a Chapter 7 bankruptcy, Collett's itself will not handle the procedure of paying off creditors, but creditors will be paid from liquidation of Collett's assets. A court-appointed trustee will liquidate Collett's assets, pay secured claims and disperse a percentage on the dollar for allowed claims from unsecured creditors. Thomas J. Richards, Collett's owner, noted that the Chapter 7 bankruptcy was voluntary, and he said it was out of concern for creditors that he undertook a going-out-of-business sale.
The story also said Richards took out the latest series of liquidation ads. Richards said those ads were not taken out by him, but by the professional liquidators conducting Collett's going-out-of-business sale.