Business Bankruptcy Filings Accelerate
We are now several months into the coronavirus pandemic, and many bankruptcy attorneys have been predicting a wave of filings. As reported by the business press, the predictions are proving accurate. The bankruptcy filings this year have increased at the fastest pace since 2013—and there is no end in sight.
Certainly, with coronavirus infections surging in Florida and other parts of the country, we anticipate more business closures and layoffs. Consequently, we do not see the business environment improving dramatically any time soon, so bankruptcy filings should remain elevated.
Almost 3,500 Chapter 11 Filings
Chapter 11 is the filing many large businesses seek, since it allows them to continue operating as they try to reorganize their debt. A debtor can also qualify for new financing, so many large companies try to keep their business going.
Thus far, the U.S. has seen 3,427 Chapter 11 filings as of June 24, 2020. This is very close to the 3,491 companies that filed for bankruptcy in the first half of 2008—the start of the Great Recession.
Some of the most famous brands in the country have filed in the past few months, including:
- C. Penney
- Chesapeake EnergyGold’s Gym
And now comes news that circus company Cirque du Soleil has also sought Chapter 11 protection. Other companies may be on the verge, including AMC Theatres.
How Bad Will Things Get?
Although the current pace of Chapter 11 filings is fast, things could be much worse. Certainly, we have a way to go before we approach the records set during the Great Recession. In all of 2008, for example, there were 8,614 total Chapter 11 bankruptcies. An astounding 12,644 companies filed for Chapter 11 protection in 2009, as the U.S. slowly dug its way out.
We don’t know how much longer the COVID-19 pandemic will last. Some scientists are anticipating another “wave” to hit as we enter autumn and children return to school. Businesses, which have reopened over the past month, might be forced to close again, and we are not sure if they have the income to survive.
As Business Insider notes, the recent rough patch has not slowed down corporate borrowing. Investment grade bond sales hit $1 billion in May, the fastest we have ever hit $1 billion in history. By way of comparison, we had to wait until November before hitting $1 billion sales in 2019.
Of course, companies are probably trying to take advantage of low interest rates. But not every company is in a position to borrow to stay afloat. Others will need to file Chapter 11 or possibly liquidate altogether.
Would You Like to Discuss Your Options?
Nowack & Olson, PLLC has helped many businesses seek bankruptcy protection. We can discuss both Chapter 11 and liquidation to determine which is right for you.
Please contact us today. A Plantation family & small business bankruptcy attorney will be glad to meet with you to go over your present difficulties. Call us at 888-813-4737 to schedule a consultation.