JOANN: 82-Year Craft Retailer's Chapter 22 Ends in Full Liquidation

JOANN's second chapter 11 filing in fourteen months—sometimes called a "Chapter 22"—ended the company's 82-year operating history as a craft and fabric retailer. The company filed for bankruptcy protection on January 15, 2025, just eight months after emerging from its first restructuring with a reduced capital structure. By May 30, 2025, every one of JOANN's approximately 800 stores had closed, ending roughly $2 billion in annual sales and nearly 19,000 jobs. The filing followed post-emergence operational challenges, including supply chain disruptions.

The first chapter 11, filed in March 2024, was a prepackaged reorganization that reduced funded debt from $1.06 billion to $555.5 million. The company exited in approximately five weeks with its 815 stores intact. Suppliers who had extended credit before the first bankruptcy either refused to ship or demanded cash-on-delivery terms, creating inventory shortages that reduced product availability. With ~$133 million in merchandise trade debt accumulating and inventory levels never reaching operational targets, JOANN's second filing proceeded as a liquidation case.

Company History: 82 Years of Craft Retail

Cleveland Origins and Growth.

JOANN traces its roots to 1943, when the Reich, Rohrbach, and Zimmerman families founded Cleveland Fabric Shop in Cleveland, Ohio. The store catered to the home sewing market during World War II, when fabric rationing and a cultural emphasis on self-sufficiency made home dressmaking both practical and patriotic. The business expanded steadily through the postwar decades, becoming Jo-Ann Fabrics and establishing itself as a specialty retailer serving sewing, quilting, and craft hobbyist communities across the country.

The company's growth accelerated through acquisitions and organic expansion, eventually operating over 800 stores in 49 states at its peak. Headquarters relocated to Hudson, Ohio, a suburb of Cleveland that maintained the company's roots in Northeast Ohio. Jo-Ann went public and traded on the New York Stock Exchange, providing capital for continued store expansion and infrastructure investment. The company rebranded to "JOANN" in March 2018, maintaining its focus on fabric, sewing supplies, arts and crafts, seasonal decor, and home goods.

Competitive Landscape.

JOANN competed with Michaels and Hobby Lobby for craft and fabric customers, while online retailers such as Amazon and platforms like Etsy offered overlapping product categories. Big-box retailers including Walmart and Target also carried craft and fabric items, adding competition for these product lines.

First Chapter 11: The March 2024 Prepackaged Restructuring

Filing and Plan Structure.

JOANN filed its initial chapter 11 petition on March 18, 2024, in the U.S. Bankruptcy Court for the District of Delaware. Unlike the freefall filing that would follow ten months later, the first case proceeded as a prepackaged reorganization with a plan already negotiated and voted upon by key creditors. The company entered bankruptcy with approximately $1.06 billion in funded debt.

The prepackaged plan achieved confirmation on April 25, 2024, reducing total funded debt from $1.06 billion to approximately $555.5 million—an elimination of roughly $505 million in obligations. The company exited bankruptcy in approximately five weeks. All 815 stores remained open throughout the process.

Post-emergence period. The company emerged from bankruptcy with its store base intact. Supply chain disruptions followed in the months after emergence.

The Collapse: What Went Wrong After Emergence

Supply Chain Crisis.

Within weeks of emerging from the first chapter 11, JOANN confronted what company filings would later describe as "acute and unexpected" inventory shortages. Suppliers who had extended trade credit before the bankruptcy filing either refused to ship new merchandise or demanded payment terms that JOANN could not meet.

Inventory levels never reached the targets management had projected for the post-emergence period, limiting product availability across the store fleet.

Vendor Relations Breakdown.

Before the first bankruptcy, JOANN's vendors had extended trade credit, typically allowing 30-60 days for payment on delivered merchandise. After emergence, vendors either demanded cash-on-delivery terms or refused to ship entirely.

JOANN lacked the liquidity to pay cash for the inventory volumes necessary to stock 800 stores adequately. Trade debt accumulated rapidly—reaching approximately $133 million by the second filing—as the company fell behind on payments to vendors who were still willing to ship.

Second Chapter 11 Filing: January 2025

Freefall Filing.

JOANN filed its second chapter 11 petition on January 15, 2025—just eight months after emerging from the first case. Unlike the prepackaged first filing, the second case proceeded as a "freefall" bankruptcy with no restructuring support agreement in place. The filing was characterized as a "Chapter 22," the informal term for companies returning to bankruptcy court after a prior restructuring.

The company's stated goal at filing was to "maximize business value." Court filings stated that a marketing process would determine whether any buyer was willing to acquire the business as a going concern or whether liquidation would be necessary.

Capital Structure at Second Filing.

Despite having eliminated $505 million in debt during the first bankruptcy, JOANN entered the second filing with approximately $615.7 million in funded debt—higher than the $555.5 million remaining after the first emergence. Additional borrowing and accumulated interest increased the funded debt balance.

The ~$133 million in merchandise trade debt represented accumulated vendor obligations from the post-emergence period.

Cash Collateral (No DIP Financing).

Unlike many chapter 11 cases, JOANN did not obtain traditional debtor-in-possession (DIP) financing. The company instead received court authorization to use cash collateral—the cash generated by the business—to fund operations during the case. Interim cash collateral approval came the day after filing (January 16, 2025), with final approval on February 26, 2025.

Sale Process and Auction

Marketing Process.

Debtors' advisors launched a marketing process upon filing, seeking buyers for JOANN's assets in various configurations. Investment banker Centerview Partners LLC contacted potential strategic and financial buyers, exploring whether any party would acquire the business as a going concern.

Gordon Brothers Stalking Horse Bid.

Gordon Brothers Retail Partners LLC submitted a stalking horse bid to serve as the floor for the auction process. Gordon Brothers, a retail liquidator, proposed an agency agreement structure under which it would conduct going-out-of-business sales across JOANN's store fleet. The stalking horse bid established the minimum value that any alternative bidder would need to exceed.

Auction Outcome (February 21-22, 2025).

The auction took place February 21-22, 2025, at the offices of Kirkland & Ellis in New York City. GA JOANN Retail Partnership LLC emerged as the winning bidder, with a structure that combined elements of a credit bid by the prepetition term loan agent with a liquidation agency arrangement. Great American Group, a retail liquidator, partnered with JOANN's prepetition term lenders to form the winning consortium.

The court approved the sale on February 26, 2025. The winning bid structure was a credit bid by secured lenders, under which the prepetition term lenders acquired the assets in exchange for cancellation of their secured debt.

Store Closures and Liquidation

On February 12, 2025—before the auction had concluded—court filings revealed that approximately 500 of JOANN's 800 stores would close. Fast Company reported customer posts on social media about the closures.

On February 24, 2025, JOANN announced that all approximately 800 stores would close. After 82 years in business, JOANN would cease to exist as a physical retailer.

Liquidation sales began March 6, 2025, at approximately 790 locations. GA Group, the liquidation agent, orchestrated going-out-of-business sales featuring progressively deeper discounts as the weeks progressed. The liquidation proceeded on a 12-week timeline, with discounts starting at modest levels and increasing as the closing dates approached. By the end of April 2025, 255 stores had completed their liquidation and closed permanently. The remaining locations continued sales through late May. The final JOANN stores closed on May 30, 2025, ending the company's 82-year retail presence.

The liquidation eliminated approximately 19,000 jobs—approximately 15,600 part-time positions and roughly 3,400 full-time positions. Store associates, distribution center workers, and corporate employees received termination notices.

Intellectual Property Disposition

While JOANN's physical retail operations were liquidated entirely, the company's intellectual property—including the JOANN brand, trademarks, and private-label brands—was sold separately. Michaels Stores acquired the intellectual property and private-label brands in a transaction that closed in June 2025.

A separate intellectual property transaction involved Singer Sourcing Limited LLC, which acquired certain IP assets for $800,000 in cash plus additional considerations. The court approved the IP Sale Order on June 23, 2025. The Singer Sourcing acquisition covered different IP assets than those acquired by Michaels.

Lease Dispositions

Lease Assumptions and Assignments.

JOANN operated approximately 800 stores under leases. Terminating these leases triggered rejection damage claims that ranked as general unsecured claims, while assuming and assigning leases to replacement tenants preserved store locations for new tenants.

Key retailers acquired portions of JOANN's lease portfolio:

• Burlington Coat Factory assumed leases for locations suitable for off-price retail
• Dollar Tree Stores, Inc. acquired leases for smaller-format locations
• Michaels Stores, Inc. assumed leases for locations adjacent to or complementary with its existing footprint

The lease assumption and assignment process involved extensive negotiation over cure amounts—the pre-petition rent arrearages and other defaults that must be cured before a lease can be assumed. Multiple notices of assumption and assignment were filed throughout the case as deals with replacement tenants were finalized.

Lease Objections and Disputes.

Landlords objected to many proposed lease assumptions and assignments, raising issues including disputed cure amounts, proposed uses that violated lease terms or tenant mix provisions, and the enforceability of anti-assignment clauses. Major landlord objectors included U-Blaine Properties LLC, RPT Newman LLC, Widewaters Group, Rayzor Ranch Marketplace Associates, and numerous shopping center owners concerned about the uses proposed by replacement tenants.

The court resolved most objections through stipulations or by overruling landlord objections. In many instances, the court found anti-assignment clauses unenforceable under the Bankruptcy Code, which generally permits assignment of unexpired leases notwithstanding contractual prohibitions. Several objections were overruled.

Liquidating Plan of Reorganization

Plan Structure.

JOANN's Second Amended Joint Chapter 11 Plan was structured as a liquidating plan rather than a reorganization. Unlike plans that contemplate continued business operations, the Liquidating Plan provided for the orderly wind-down of the debtors' remaining affairs, resolution of outstanding claims, and distribution of available proceeds to creditors according to the priority scheme established by the Bankruptcy Code.

The plan established a GUC Trust to hold and distribute value to general unsecured creditors, administered by a GUC Trustee. A Plan Administrator was appointed to manage the estate's remaining assets, pursue potential claims, and oversee the wind-down process. The plan included broad releases protecting various parties from future litigation related to the bankruptcy.

Plan Timeline.

The confirmation hearing occurred on July 10, 2025, approximately six months after the filing date. The court entered the Confirmation Order, and the plan became effective on July 16, 2025.

Creditor Treatment.

Secured and priority claims received full payment, consistent with the Bankruptcy Code's priority scheme. Prepetition term loan lenders—whose credit bid won the auction—received pro rata shares of remaining wind-down proceeds after satisfaction of higher-priority claims. General unsecured creditors received interests in the GUC Trust, entitling them to distributions from trust assets as claims are resolved. Equity interests were cancelled entirely, receiving no recovery.

Post-Confirmation Administration.

The plan appointed Ann Aber as Plan Administrator to oversee the wind-down of the debtors' affairs. Steven Balasiano, through MHR Advisory Group LLC, serves as GUC Trustee managing the trust established for unsecured creditor distributions. As of late 2025, the Plan Administrator and GUC Trustee continue to administer the estate, with claims objection litigation ongoing.

Over twenty omnibus claims objections have been filed, challenging claims on grounds including improper assertion of administrative priority under Section 503(b)(9), duplicate filings, amended claims exceeding original amounts, claims for which no liability exists, and late-filed claims. The resolution of these claims objections will determine the universe of allowed claims entitled to distribution from the GUC Trust.

Case Timeline

Notable Legal Disputes

The bankruptcy estate filed more than twenty omnibus claims objections seeking to reduce, reclassify, or disallow claims asserted against the estate. Common objection grounds included improper 503(b)(9) claims asserting administrative priority without proper documentation, duplicate filings, amended claims exceeding scheduled amounts without supporting documentation, claims for which no liability exists, and late-filed claims submitted after the bar date. Court orders sustained many of the debtors' objections, reducing the pool of allowed claims.

Ocean Network Express (North America) Inc. and OOCL (USA) Inc.—shipping companies that had transported merchandise for JOANN—sought relief from the automatic stay to exercise maritime liens on cargo. Maritime liens arise under admiralty law and attach to cargo for unpaid shipping charges. The shippers argued that maritime liens are not dischargeable in bankruptcy and must be honored. The court granted relief to ONE to enforce its maritime liens.

JOANN Inc. (through the Wind-Down Debtors) filed an adversary proceeding (Case No. 25-50139) against multiple defendants including Advantus Corp., Fairfield Processing Corp., Gwen Studios LLC, Low Tech Enterprises Inc., and Poly-Fil. The complaint sought enforcement of the automatic stay and asserted additional claims against these vendors. As of December 2025, the litigation remains active with motions for judgment on the pleadings filed.

Former officers and directors sought relief from the automatic stay to access directors' and officers' (D&O) insurance proceeds for defense costs in anticipated litigation. The court granted relief allowing access to D&O insurance, recognizing that such insurance exists specifically to protect corporate fiduciaries and that the estate's interest in the policies was limited.

Professional Roster

Debtors' Professionals.

Official Committee of Unsecured Creditors.

Post-Confirmation Officers.

Frequently Asked Questions

Why did JOANN file for bankruptcy twice in 14 months?

The first chapter 11 filing (March 2024) eliminated approximately $505 million in debt. After emergence, supply chain disruptions and vendor payment terms limited inventory availability, and the company returned to chapter 11 eight months later.

Are all JOANN stores now closed?

Yes. All approximately 800 JOANN stores across 49 states closed by May 30, 2025.

What happened to the JOANN brand?

Michaels Stores acquired JOANN's intellectual property, including trademarks and private-label brands. Singer Sourcing Limited LLC acquired additional IP assets for $800,000. No physical retail stores operate under the JOANN name after the May 30, 2025 closures.

How many employees lost their jobs?

Approximately 19,000 employees were impacted—roughly 15,600 part-time positions and approximately 3,400 full-time positions. All positions were eliminated by the completion of store closures in late May 2025.

What is a "Chapter 22" bankruptcy?

"Chapter 22" is an informal term for a company's second chapter 11 bankruptcy filing. JOANN filed its second chapter 11 just eight months after emerging from the first.

Who bought JOANN's assets?

GA JOANN Retail Partnership LLC—a joint venture between Great American Group and JOANN's prepetition term loan lenders—won the auction with a credit bid structure. The partnership conducted the liquidation sales. Michaels separately acquired intellectual property, while Burlington, Dollar Tree, and Michaels assumed selected leases.

What caused the supply chain disruption after the first bankruptcy?

Vendors who had extended credit before the first bankruptcy either refused to ship merchandise or demanded cash-on-delivery terms. Inventory levels never reached operational targets, and trade debt accumulated.

Will unsecured creditors receive any recovery?

General unsecured creditors received interests in a GUC Trust and may receive distributions as claims are resolved and trust assets are liquidated. Recovery is variable and depends on the outcome of claims objection litigation and the total proceeds available for distribution. Priority and secured claims are paid first.

How long did the second bankruptcy case take?

The second case proceeded from filing (January 15, 2025) to plan confirmation (July 10, 2025) in approximately six months.

What lessons does JOANN's failure offer?

JOANN reduced funded debt in 2024, returned to chapter 11 eight months later, and liquidated its store base in 2025. Vendors and other unsecured creditors faced a second case after the first emergence.

Who is the claims agent for JOANN?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

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For additional coverage of retail sector bankruptcies and restructuring developments, explore the ElevenFlo bankruptcy blog.