Going Through Chapter 11: One Jeweler’s Story

Hofmeister Personal Jewelers, a highly-regarded Indianapolis jeweler that filed for bankruptcy protection in April 2011, emerged from Chapter 11 on Oct. 3. The store’s owner, Carter Hofmeister, shared with me what the process is like—and had some advice for jewelers who may be going through similarly tough times:

Being a jeweler I really didn’t know how something like this works. When I first went Chapter 11, I felt like I didn’t have any other choice. After a difficult series of events, the bank called my note. I had millions in inventory, so I was adequately secured. But banks today are really not business-friendly.

When you first do it, your first fear is the unknown. You have all these different companies, they smell blood in the water. They tell you the best thing to do is to go Chapter 7, they put the fear of God into you, they try to intimidate you. After a while, I stopped listening to them.

When you go through this you are negotiating with everybody. The first thing that happens when you file Chapter 11, you have to get control of your bank account. There was a five day period where I didn’t have a bank account. Luckily, it didn’t include Friday, when payroll was due.

Talking to my vendors was probably the most painful process. I am a second generation jeweler, and I had to go to them with my hat in my hand. It really ended up showing me who my real friends are. The big guys were all there for me.

Twenty-four hours after I filed, the Indianapolis Business Journal put something out there, and I was really scared. And then the day after I filed, a reporter from the Indianapolis Star called me up and they sent a photographer and they took a picture of me and my daughter and the story ended up on the front page of the business section. And I didn’t blame anyone but myself. I could have blamed the economy, but I said, bottom line, I am the one who messed up, I could have protected myself and my company better. And then when the article came out, the response was incredible. I had people from the church we belong to come in here, people from the community. That April we wrote three times what we wrote the April before. Then that kind of settled down. 

It was then I had to decide whether to have a sale. We had never had one as long as we had been in business. That’s just not our M.O. But we did and November ended up being really good and we ran the sale through Christmas. These things kind of taper off after a while but we were able to use Valentine’s Day as kind of an exclamation point. The sale did what it what supposed to do: It raised a lot of cash and it put me in the position to have enough cash to pay people off.

Until 48 hours ago, I wasn’t sure I was going to make it through. My goal was to make sure all my vendors were paid. And yesterday, the judge said we need more businesses like Hofmeister that aren’t just working for personal gain and he said that I get to emerge. It was a beautiful thing…

I’ve learned that leverage is no way to run your business today. I remember I was in a Skull Group in the 1990s and they said cash is king. And it’s true. Borrowing is no way to run your business. If I can’t pay for it, I don’t want to do it. My goal is to have no debt at all in 10 years.

I drive a pick-up truck. I have had every nice car known to man. I know a lot of jewelers live beyond their means and I know I have at different points in my life. But it’s about trying to figure out what’s important, whether that’s your family, and by family I include the people you work with.  

Chapter 11 is not a course of action I would recommend. In hindsight, I might have been able to avoid it if I had been more open before I filed with my vendors and with the banks. I was able to make it through by hard work, stick-to-itiveness and faith. But fear is just not a way to live your life.

JCK News Director