Why are corporate bankruptcies on the rise?

Let’s start with the numbers, because, well, they tell one story, and it may or may not be the right one.

There were 32 “mega” bankruptcies (or bankruptcies of companies with assets of over $1 billion) in the 12 months ending June 30, according to a Cornerstone Research report, eclipsing the two-decade average of 23. Of those mega-bankruptcies, 17 happened in the first half of 2025, marking the most recorded for any six-month period since the Covid pandemic.

And beyond the megas, Cornerstone clocked 117 filings among public and private companies with $100 million in assets during the same period, 44% above the 81-bankruptcy average between 2005 and 2024.

Numbers-wise, it doesn’t look great. But solely focusing on the numbers might miss the point, according to Jacob Adlerstein, a partner in the restructuring department at Paul, Weiss, where he advises on bankruptcy cases and corporate restructuring.

“Looking exclusively at the number of large Chapter 11 filings on a year over year basis, I think is probably a relatively blunt measure of financial health,” he told CFO Brew, adding “there’s probably noise in that number,” making it “hard to extrapolate from that broader significance to the health of the economy more broadly.”

A more important consideration is the underlying causes cited in filing, “and the extent to which any of those underlying causes affect the businesses that CFOs interact with or rely on in their business,” Adlerstein said. So, what gives?

What’s driving the rise? In the Cornerstone report about mega bankruptcies, researchers noted that some of the most commonly cited culprits in first day declarations included high inflation impacting demand, industry-specific demand reductions, high interest rates, and regulatory and policy challenges.

“Companies filing mega bankruptcies over the last year have continued to fault high inflation and interest rates, which have impacted consumer demand and raised the costs of operating and raising capital,” Matt Osborn, a principal at Cornerstone, said in the report, which he co-authored. He added that corporate bankruptcy filers in the last year have also “increasingly pointed to shifts in the regulatory, legal, and policy landscape as another key driver of financial distress, in particular policies relating to renewable energy or international trade.”

Adlerstein called out the same primary culprits, emphasizing inflation and interest rates in particular.

“First and foremost, you can’t understate the significance of interest rates remaining high as a principal source of distress for a lot of companies that ultimately have to file for Chapter 11 protection,” he said. “High interest rates, even if they’re projected to come down in the future, remain problematic for companies that are needing to refinance or address liquidity problems today.”

Similarly, even if inflation falls, Adlerstein noted “a lot of the damage may have already been done to companies that were, for example, heavily focused on things like consumer spending as a source of their revenue,” as was the case with some “retail companies that were forced to file in 2025.”

Industry-specific headwinds also caused pain for renewable energy and solar companies, Adlerstein added. Nearly half (48%) of the 31 mega bankruptcies cited “challenges in the regulatory, legal, and policy landscape” in their first day statements, “most often relating to public policies involving renewable and clean energy or international trade and tariffs,” per the Cornerstone report. Four of the renewable and clean energy companies that filed for bankruptcy called out “public policy uncertainty” as a driver.

For CFOs that might be grappling with some of the same stress points (but, ideally, not considering bankruptcy), pretend you’re in math class: Isolate the variable.

“You have to first diagnose the problem before you can identify a solution,” Adlerstein stressed. “Once you’ve diagnosed the problem, then it’s a question of understanding the kind of tools in the toolkit that a company can utilize, whether it’s raising capital or engaging in negotiations with your creditors, to try and find a solution that ultimately achieves the company’s objective.”