2023 was a busy year for the bankruptcy courts. Commercial Chapter 11 filings rose 72% in 2023 over 2022, to 6,569, bankruptcy data provider Epiq reported. The number of business filings as a whole grew by 19%, to 25,627. And S&P Global Intelligence data showed 591 corporate bankruptcy filings through November 2023, making it one of the most active years since 2011.
But the rise in bankruptcies was to be expected, various experts said, given the spike in interest rates, the tight lending market, and the end of pandemic relief.
“As anticipated, we saw new filings in 2023 increase momentum over 2022 with a significant number of commercial filers leading the expected increase and normalization back to pre-pandemic bankruptcy volumes,” Michael Hunter, VP of Epiq AACER, said in a statement.
Many companies borrowed heavily during the era of lower interest rates, and continued to accumulate debt during the post-pandemic years, Brigham Young University law professor Brook Gotberg told NPR. Now debt-saddled companies are finding themselves low on cash, but are contending with high interest rates and lenders who are reluctant to extend them credit, NPR reported. Some have been forced to file for bankruptcy.
“Bankruptcies are cyclical,” Gotberg, who focuses on bankruptcy law, said, telling NPR, “This is the market swing we’ve been expecting for some time.”
Retailers selling consumer discretionary products filed the most bankruptcies last year—76 by November, according to S&P Global data. And they may be in for a challenging 2024, if consumer bankruptcy data is anything to go by: Individual filings were up 18% in 2023, Epiq found.
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