Increase in Business Bankruptcies as Slow Decline Transforms into Rapid Failure

Bankruptcy Filings on the Rise as Higher Interest Rates and Decreasing Consumer Spending Take their Toll on Major Corporations

Business bankruptcies are becoming increasingly common, with nine major companies filing Chapter 11 cases in just three days this week. According to data compiled by Bloomberg, this period has been one of the busiest on record for corporate bankruptcies. The trend of increasing bankruptcies has been attributed to a combination of factors including higher interest rates and decreasing consumer spending.

Despite the rise in business bankruptcies, bankruptcy lawyer Derek Abbott notes that this does not necessarily indicate broader economic trouble. He has seen an increase 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 also saw a significant jump of 43% in the first three months of 2024 compared to the same quarter the previous year. Michael Hunter, vice president at Epiq, anticipates that filings will continue to rise throughout the year. 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.

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