Increase in Business Bankruptcies as Slow Decline Transforms into Rapid Failure

Bankruptcy filings have been steadily increasing over the past 20 months, with a significant increase in major corporate bankruptcies happening this week. Nine companies filed big Chapter 11 cases since Sunday, including two telecommunication and two pharmaceutical companies. This trend has been attributed to higher interest rates and a decrease in consumer spending, according to Michael Hunter, vice president at Epiq.

Despite the increase in business bankruptcies, bankruptcy lawyer Derek Abbott notes that this doesn’t necessarily indicate broader economic trouble. He has seen a rise in restructuring work in recent months, even as the US economy avoided predictions of a recession when the Federal Reserve increased interest rates. Abbott highlights that certain sectors such as telecom, retail, and pharmaceutical are facing challenges that contribute to the rise in bankruptcy cases.

Commercial insolvencies saw a significant jump of 43% in the first three months of 2024 compared to the same quarter the previous year. Hunter anticipates that filings will continue to rise throughout the year due to these factors. The diverse nature of the US economy means that even in times of overall growth, some sectors will continue to struggle, leading to an increase in bankruptcy cases.

By Aiden Johnson

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