Major mattress chain converts to Chapter 7 bankruptcy liquidation

The furniture retail sector has suffered from economic distress in the last year with major home furnishing companies closing stores and filing for bankruptcy protection.

Companies that have filed for bankruptcy include AFC Acquisition Corp., owner of Albuquerque-based furniture chain American Home Furniture & Mattress, which filed for Chapter 11 bankruptcy to reorganize its business, close certain stores, and continue operating on March 4.

American Signature Inc., which operated Value City and American Signature Furniture chains, filed for bankruptcy in November 2025 and began liquidating its 89 stores in January 2026.

The furniture industry has cited declining sales, as a result of a multi-year housing slump, and rising product and labor costs driven by inflation and higher tariffs, for a reduction in furniture company sales and profits.

Financial distress has led another major chain to file for bankruptcy and liquidate its stores.

38-year-old American Mattress will liquidate its stores in Chapter 7 bankruptcy.

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American Mattress liquidates in Chapter 7

Iconic, family-owned mattress retail chain American Mattress has lost its battle to remain in business, as its Chapter 11 bankruptcy case has been converted to Chapter 7 liquidation.

A going-out-of-business-liquidation sale had not been announced, and the company had not announced the number of employees affected by the store closings, at last check.

Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware signed an order on March 16 converting the American Mattress Chapter 11 to Chapter 7 liquidation after approving motions from the U.S. Trustee and the Official Committee of Unsecured Creditors in the case at a March 13 hearing, according to Furniture Today.

The Official Committee of Unsecured Creditors alleged in a Jan. 28 conversion motion that the debtor had not made meaningful progress toward reorganization, had not filed a reorganization plan, and had operated without credible financial projections, a business plan, or independent financial oversight.

The U.S. Trustee also filed a motion on Jan. 30 to either convert the bankruptcy case to Chapter 7 or dismiss the case, since the debtor had not paid rent for leased stores, had not paid professional fees, and had recorded $1.26 million in operating losses since November.

The Elk Grove Village, Ill.-based furniture chain, which operates 45 locations in four states, including Illinois, Indiana, Michigan, and Florida, however, confronted the Chapter 7 conversion filings with an objection in the U.S. Bankruptcy Court for the District of Delaware on March 3, 2026, claiming that a buyer has offered to purchase its assets and pay all cure costs, Furniture Today reported.

American Mattress said in its objection that if its case were converted or dismissed, only the secured lender would be paid proceeds from the liquidation, while unsecured creditors would receive nothing.

In its objection, American Mattress said it had cashflow problems since it filed for bankruptcy, which it said it was addressing, and it was developing an exit strategy from bankruptcy. It also planned to file an asset sale motion, the report said.

The debtor’s parent, AFM Mattress Company LLC, filed its Chapter 11 petition on July 6, 2025, listing $1 million to $10 million in assets and liabilities and seeking to reorganize its business and restructure debt.

AFM Mattress Company did not file a restructuring plan or name a new funding source at the time. The debtor has approximately 100-199 creditors, and the petition indicated that funds will be available for distribution to unsecured creditors.

The debtor had reportedly been closing locations with notices posted on front doors stating, “Store Temporarily Closed.” The notices provide a phone number to call for questions and to inquire about orders.

American Mattress, which was established in 1988, features top mattress brands, including Serta, Beautyrest, Sealy, Tempur-Pedic, Purple, and Stearns & Foster.

The mattress retailer’s financial distress matches distress in the furniture business nationwide, as sales declined 0.82% for 2025, compared to 2024 unadjusted, according to the CNBC/National Retail Federation Retail Monitor.

For January 2026, furniture and home furnishings sales declined 0.31% month over month seasonally, the report said. February results have not been released yet.

“Furniture, of course, is many times a discretionary and deferrable expense, so weakness in the overall economy or declines in consumer confidence, like we’ve seen the last few months, can impact consumers’ willingness to spend,” Mark Laferriere, an assurance partner at Smith Leonard, told Homes.com in November 2025.

“Furniture purchases are also tied to the overall housing market, which has been sluggish, but could be primed for a resurgence with higher inventory and the ongoing reductions in interest rates,” Laferriere added, as TheStreet’s Daniel Kline reported.

Related: Major pizza chain’s franchisee files for Chapter 11 bankruptcy

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