Rising Business Bankruptcies: 72% Increase in Chapter 11 Filings

Business bankruptcies continue to rise whether for Chapter 11 bankruptcy or Chapter 7 bankruptcy. Bankruptcy filings have also increased for consumers.

Updated on December 20, 2024.

Key Points

• Chapter 11 business bankruptcies have increased substantially
• Well-known and established businesses have filed for bankruptcy post-coronavirus pandemic as brick-and-mortar stores fail to adjust to a new online economy.

Business Bankruptcies on the Rise as Well as Chapter 7 Bankruptcy Filings for Business and Individuals

EPIQ, which is used by lawyers- including myself for uploading documents to the bankruptcy trustees and the bankruptcy court system, published new data on the increase in business bankruptcy filings.

Chapter 11, which is typically a chapter in bankruptcy used by businesses, increased by over 72%. This included Chapter 7 liquidation cases, which increased 19% to 25,627. Personal bankruptcy filings increased 18%.

We have been seeing a substantial increase in bankruptcy filings post-Covid. Some of the popular companies we all know, such as SmileDirectClub, WeWork, Rite Aid, Party City, Bed, Bath & Beyond, and David’s Bridal, filed for bankruptcy. But unfortunately, this was expected. New reports issued by the Federal Reserve have concluded the same with individual bankruptcies, such as Chapter 7 and Chapter 13. Even credit card debt is at an all-time high for consumers. You can see that separate post below.

• The 1.3 Trillion Dollar Credit Card Problem

The 1.3 Trillion Dollar Credit Card Problem

The COVID-19 Effect

Because of the Coronavirus pandemic, creditors were not pursuing collections aggressively as they knew there was no point in suing a debtor if the debtor wasn’t working. This was a hard lesson learned from the mortgage foreclosure crisis of 2008 where banks and lenders were not flexible in payment structures with their customers.

During COVID-19, it was common for creditors to offer forbearances to give debtors breathing room. This applied to most debts such as credit cards, mortgages, car loans, and student loans. A forbearance is a temporary postponement on paying back the debt. This was especially common with mortgages during the coronavirus pandemic. For example, the lender would give the homeowner a 3-6 month break on paying the mortgage. That doesn’t mean those months weren’t paid back or waived, they were simply added to the end of the loan.

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For example, if the lender provided a 6-month forbearance, and the homeowner had five years left on the mortgage, now there were five years and six months left on the mortgage.

But, now that creditors are pushing forward with collecting balances and many have not recovered fully financially since COVID-19, credit card balances have increased, which has resulted in a higher average balance on credit card debt nationwide, increased defaults, and now bankruptcy.

To read the article by Epic Bankruptcy, click the link: Commercial Chapter 11 Filings Increase 72 Percent in Calendar Year 2023

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• Bankruptcy
• Your Wallet

Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.