Bad Boy Furniture's $25M liquidation sale has already started. Here's what you need to know

Bad Boy Furniture has begun the process of clearing out $25 million in inventory as it restructures its business.

A court order issued by Judge Herman Wilton-Siegel last week paved the way for the beginning of the sale, just in time for Black Friday.

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Infinity Asset Solutions is overseeing the sale and has promised discounts of 20 to 50 per cent on everything from sofas to bedroom sets, dining tables, mattresses and electronics.

Here is what you need to know:

HOW DID BAD BOY ARRIVE AT THIS POINT?

The first Bad Boy store opened in 1955 and by 1990 the chain had more than 40 locations.

The company was started by Mel Lastman, who dropped out of school to work at an appliance store before he opened his own. Lastman also went on to become the first mayor of the newly amalgamated City of Toronto, serving from 1998 to 2003.

After Lastman sold the business in 1975, the retailer filed for bankruptcy. But Bad Boy was revived in the early ‘90s by Lastman’s son, Blayne. Both Mel and Blayne Lastman appeared in ads together, shouting, “Who’s better than Bad Boy? Nooobody.”

Today, there are 12 stores throughout southern Ontario. In the court filings, the furniture chain has $25 million in assets – from inventory to store fixtures – and about $26 million in liabilities. The parent company, Lastman Furniture Inc., owes its vendors, including most of its furniture and appliance suppliers. It owes $13.7 million to its unsecured creditors alone.

• READ MORE: A timeline of retailer Bad Boy's rise and fall

Ian Lee, associate professor at the Sprott School of Business at Carleton University who previously had worked with Bad Boy as a lender in the ‘70s and early ‘80s, said he’s unsurprised to see the storied furniture chain in this position.

“I mean, retail has a very high failure rate, relatively speaking manufacturing firms [are] much lower [since] there’s far fewer of them. They’re far more capital intensive,” Lee said.

“You have fewer competitors whereas retailers, almost anybody can open up a retail store … so it’s very difficult to differentiate. You try and build your brand, these companies advertise like crazy and try and create a strong brand, like Leon’s Furniture or Bad Boy, but at the end of the day, you’re still subject to the whims of the economy, interest rates, and that sort of thing, and as I said, it’s very, very competitive.”

The furniture chain was ordered by Judge Herman Wilton-Siegel to start selling off its merchandise, with sales taking place across the 12 stores for the first 30 days of its liquidation period. Under the court order, the sales must come to an end by Feb. 15.

Bruce Lyle, president of Infinity Asset Solutions, which was appointed to oversee the total liquidation sale, confirmed to CTV News the liquidation sale started earlier this week and said shoppers can find discounts on everything, from electronics to appliances.

Here’s what customers need to know about the liquidation sale.

WHAT WILL THE DISCOUNTS BE LIKE?

Lee told CTV News Toronto all sales are typically final during these types of proceedings.

The discounts start at 20 per cent and go up to 50 per cent off the lowest marked prices.

“These massive discounts include a diverse selection of furniture, including sofas, bedroom sets, dining tables, mattresses, electronics and more,” Infinity Asset Solutions said in a release. “All sales are for a limited time only and consumers are encouraged to show early for the very best selection.”

Lee said that as it draws closer toward the end of the sale, it is likely the prices will increase to 50 per cent or more to move any remaining inventory.

“As the sales reduce the inventory, the trustee does not want to have to dispose of leftover inventory,” Lee said.

Lyle said customers can expect further increases, “probably a couple of weeks out” before Feb. 15.

WHAT HAPPENS WHEN A COMPANY FILES UNDER THE BANKRUPTCY AND INSOLVENCY ACT?

When a company has petitioned into bankruptcy or receivership, the owner is no longer in charge and it falls to the trustee, Lee said.

“The trustee’s job is to manage the sale of everything, liquidate everything, and then add up all the money and then decide the priority, which is spelled out in very clear language in the Bankruptcy Act,” Lee said.

“When the bankruptcy comes to an end, the court will discharge the company, or the person, and then you are a discharged bankrupt. What that means, it has a very precise legal meaning, nobody can go after that person or that company and say, ‘Hey, I want my money, you didn’t pay me because of the bankruptcy.’”

• READ MORE: 'They just outright lied': Bad Boy Furniture refuses to honour purchases, customers demanding answers

Court filings indicated the furniture retailer won’t be able to refund its customers’ money, and the company said it’s not in a position to fulfill uncompleted orders or return customers’ deposits.

Bad Boy urges customers to contact their credit card company to attempt to get a refund. In its notice to customers, the company provided them a copy of their filing as credit card companies may need it as evidence of the retailer’s insolvency.

With files from Bryann Aguilar and The Canadian Press