Many probably remember that the Sunset Junction Street Festival in Silver Lake, California, was called off at the last minute last year. It is now clear why that happened.

The Sunset Junction Neighborhood Alliance owes about $900,000 in debt and has now filed for Chapter 7 bankruptcy protection. The organization reportedly owes the city of Los Angeles about $250,000, and most of the rest of the debt amounts to booking fees that were not paid to musicians who were scheduled to perform at the 30-year-old festival.

The Sunset Junction Neighborhood Alliance is a non-profit organization that simply seemed to have difficulties meeting its financial obligations.

The street festival began as a free grassroots event, in which neighborhood businesses and local musicians participated. Over its 30-year history it has become a ticketed event that attracts national attention. During these major changes and growth, the organization, like many small businesses, seemed to suffer growing pains related to its finances.

Last year, the city declined to award the organization the permits that it needed to pull off the 2011 festival because the non-profit stilled owed the city money from previous years.

Often, small businesses file for Chapter 13 bankruptcy protection, because it allows them to reduce and eliminate some debts while keeping their business. This often encourages creditors to accept lower interest rates and better loan terms. Tax debts that are older than three years can sometimes be completely eliminated.

The Sunset Junction Neighborhood Alliance filed for Chapter 7, which means it will likely stop all operations. A trustee will likely be appointed to sell the company's assets in order to pay its debts.

Source: LA Times, "Sunset Junction Street Festival group files for Chapter 7 bankruptcy" Feb. 16, 2012