Chapter 11 Bankruptcies on the Rise

While money managers expected a surge in Chapter 11 filings during the pandemic years, that  swell didn’t arrive until this year.  When looking at the trends associated with the uptick make this wave somewhat unique.

What’s Driving the Bankruptcies? 

An examination of the first-day declarations—or the affidavits explaining the business, structural components, and events predating the Chapter 11 filings– tends to include expected macroeconomic factors, including the rise in interest rates and inflation, the Ukraine/Russia war, challenges to supply chains, stricter lending requirements, and, of course, the strains brought on by the pandemic.

Chapter 22 

Companies that file Chapter 11 only to reorganize and then refile Chapter 11 quickly thereafter are known colloquially as Chapter 22 filers, and the rate of these filings is higher than ever in 2023, with the time frame between filings shorter than ever. While the pandemic was partly to blame for some of these Chapter 22’s, inflation and interest rates hurt a fair share of companies, as well.

Silicon Valley Bank Failure 

The March ’22 collapse of Silicon Valley Bank sent stock prices of small- and mid-size banks plummeting, leading to the failures of First Republic and Signature Banks. And while this banking crisis is nothing in comparison to the banking crisis of 2010-11, the surprise collapses did frighten investors.

Distress in the Healthcare Industry 

Hospitals, nursing care facilities, and senior living centers, as well as companies that provide medical equipment, have been dealing with a financial strain of late, too. The reasons behind the strain are varied, including a reduction in the number of individuals looking for healthcare that’s not related to COVID, a huge exodus of health-care professionals who were overworked and underpaid during the pandemic, and inflexible reimbursement rates from Medicare and Medicaid that left providers holding the bag for increased costs of medicine, supplies, and services.

Retail Challenges 

Anyone who’s been to a shopping mall in recent years can attest to the decline in business that brick and mortar businesses have suffered because of and since the pandemic. Companies have cited myriad issues in first-day declarations, ranging from supply disruptions to inflation and consumer reductions in spending, on top of expensive leases, all adding up to Chapter 11 filings growing tremendously. As consumer habits adjust to the post-pandemic era, some businesses are benefiting, while others, like those focused on stay-at-home clothing and activities, are heading for a slump.

Chapter 11 Help 

Has your business struggled this year?  Perhaps a Chapter 11 filing is the ticket to the restructuring you need to find your way out from under the financial strain that’s plaguing you.  The experienced Miami Chapter 11 bankruptcy attorneys at The Law Office of Julia Kefalinos can answer your questions and get you started on the right track.  Schedule a confidential consultation in our office today.