Since the end of the first quarter of 2020, bankruptcy professionals have been planning for a substantial increase in business bankruptcies. The newest statistics tell us that the wait is over. These bankruptcy filings follow the sustained economic contraction rooted in the COVID pandemic. But it would be too simplistic to say that COVID is the sole cause of this trend. Most of the businesses that have filed faced other challenges, such as heavy debt burdens, deteriorating markets or strategic missteps. COVID induced contraction became the problem, which convinced management or creditors that restructuring could not be deferred.
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The wait is over: the increase in Chapter 11 filings has arrived
Commercial Chapter 11 filings in July rose 52% year-over-year, adding to a feverish streak of corporate bankruptcies this year following the Covid-19 outbreak, new data show. In July, businesses filed 642 Chapter 11 filings, compared to 423 during the same month last year, according to a report released Wednesday by bankruptcy software developer Epiq Systems Inc. More than 4,200 commercial restructuring cases have been filed in the U.S. since the beginning of the year, it said.