Junior girl’s footwear firm Penny Loves Kenny filed for bankruptcy in New York late last week.

In court papers, the seven-year-old company, also known as Penny & Kenny Shoes LLC, reported assets of almost $900,000, with total liabilities equaling almost $4.9 million. According to the documents, filed on July 31, Penny Loves Kenny’s financial difficulties can be attributed to “general market conditions and the delivery of inferior product” from certain suppliers, as well as litigation against the company.

As for the future of the company, court papers said it “intends to restructure its organizational abilities to decrease overhead and increase sales. Alternatively, [the company may] sell all or part of its business operations.”

During the FFANY show on Tuesday, an upbeat Kenny Robinson, co-founder of Penny Loves Kenny, told Footwear News that the filing was a move recommended by his attorneys, based on the costs incurred and future potential costs related to a longtime legal battle between his company and two China-based agents.

“We’ve had two major legal issues that have been hounding us for the last six years, from when I first started my business” said Robinson. “We’ve already invested a huge amount of money [in legal fees]. We’ve tried to settle many times, and my attorneys advised me that [filing for bankruptcy protection] would be the most economical way to handle this.”

Though he declined to provide details on the lawsuits, Robinson added that his business is strong.

“In the last six months, we’ve opened a showroom and added two brands [Park Lane and First Love by Penny Loves Kenny],” he said. “My business is great, but it just had to happen this way.”

Robinson also added that he does not think the filing will cast a negative light upon his business among current and prospective retailers. He said he expected the situation to be cleared up within three to six months.