In a Chapter 11 bankruptcy, a company often loses control of its business. It may enter with a financing plan, but if creditors or the court disagree, things can go wrong quickly, and that’s often not good news for customers.
In many cases, when a consumer places an order that has not been delivered, the company cannot make good on that sale, even if the order has already been paid for. There have also been cases where the shipping company hasn’t been paid, so it refuses to deliver, even though the customer paid any shipping charges.
BDO, a large accounting firm, shared what can happen in this type of Chapter 11 bankruptcy situation.
“When a retailer spirals into bankruptcy, all its assets are immediately frozen, which can leave millions of dollars in customer deposits on orders that were not yet completed and/or delivered to customers. Consumers who are owed refunds of their deposits have to get in line and compete with the retailer’s other creditors for any cash that is available,” it explained.
That often means not getting anything.
“In many cases, however, there is nothing the consumer can do but accept the fact that they have lost all or most of their deposit paid to the bankrupt business,” BDO added.
That was a real risk for Sleep Number customers when the company filed for Chapter 11 bankruptcy in June, but a deal to exit bankruptcy should mean that all customers will receive any items they paid for.
Sleep Number filed Chapter 11
While a number of mattress retailers have filed Chapter 11 bankruptcy since the Covid pandemic, the category has actually bucked the retail downturn.
The overall U.S. bed and mattress sector may have performed well in 2025, with revenue rising by 1.3% to $28.4 billion year over year, according to an IbisWorld analysis.
That healthy market did not help one of the better-known names in the space, Sleep Number.
Sleep Number Corporation filed for Chapter 11 bankruptcy reorganization, seeking a sale of substantially all of its assets as a going concern to Canadian rival mattress retailer Sleep Country Canada Inc., as stalking-horse bidder for $415 million in cash and assumed liabilities.
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The debtor has filed a bidding procedures motion, which calls for an auction to be held if a qualifying bid other than the stalking-horse bid is received before a bid deadline.
That effort has succeeded, as Sleep Country Canada’s offer was approved by the bankruptcy court, and the company has taken over the assets of Sleep Number.
Sleep Number has a Taylor Swift Connection
While the chain’s finances were a blank space, Taylor Swift‘s now-husband Travis Kelce has been a longtime supporter of Sleep Number.
He tried to help the chain shake off its financial troubles by becoming its biggest investor, holding a 5% stake, but while he insisted that the brand belonged with him, his endorsement did not keep the chain afloat.
“Saying he has ‘personally relied on’ the adjustability of Sleep Number’s mattresses, Kelce in January became one of the mattress maker’s top shareholders with under 5% company ownership. He acquired common stock on the open market and was granted compensatory restricted stock units, and Sleep Number at that point also announced that Kelce would be featured in its advertising for the next three years,” according to Retail Dive.
Sleep Number has a new owner
Sleep Country Canada has just begun its love story with Sleep Number as it takes over the brand out of Chapter 11 bankruptcy. And, while not everything has changed, the new owner believes it knows all too well how to exploit the brand’s assets.
Sleep Country Canada CEO Stewart Schaefer, in a statement, noted the innovation at the U.S. mattress manufacturer and retailer, which boasts more than 1,000 patents and patents pending.
“This is a game-changing acquisition,” Schaefer said in a press release.
Sleep Number runs more than 570 stores in the U.S., and Sleep Country runs over 300 stores under the banners Sleep Country Canada, Dormez-vous, Endy, Silk & Snow, Hush, Casper Canada, and Simba. Following their tie-up, the company will be the second-largest sleep retailer in the world, after Somnigroup International, RetailDive noted.
The new company has pledged that it won’t have any bad blood with past vendors or customers.
“Our priorities remain clear,” Schaefer continued. “We will continue serving customers with the same commitment to quality, expertise and care that they have always expected from our brands. We will also take the time to listen, learn and build relationships across our teams as we shape the future together.”
A new life for Sleep Number
At the time of its Chapter 11 filing, Sleep Number’s debts include $672.5 million in secured credit facilities.
The debtor’s largest unsecured creditors include Leggett & Platt Inc., owed over $10.2 million; Horizon Media, owed over $7.3 million; Elite Comfort Solutions, owed over $6.1 million; Flextronics International Europe, owed over $6 million; Gumotex, owed over $3.7 million; and NFL Ventures LLP, owed over $2.6 million.
Sleep Number entered Chapter 11 confident that it’s alright, and that the deal with Sleep Country Canada would check off its wish list, and, all things considered, deliver the company’s wildest dreams as it moves forward.
“While we have made meaningful progress advancing our turnaround efforts and strengthening our operations, our capital structure remains unsustainable,” Sleep Number CEO Linda Findley said in a statement.
“Following a comprehensive review of our strategy options and a robust sale process, we are confident that moving forward with the Sleep Country Canada agreement and this court-supervised sale process will enable us to address our financial constraints,” Findley said.
Under the new ownership, it’s expected that all customers will receive their orders.
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