The Rise in Corporate Bankruptcies Calls for Experienced Attorneys

Corporate bankruptcy filings in the United States reached a 14-year high last year. In 2024 alone, 694 public and private companies filed for bankruptcy protection. This rise in corporate bankruptcies is alarming.

The previous high was 638 in 2020 as the U.S. and global economies were hobbled by the COVID pandemic. In 2010, 828 companies failed in the wake of a global financial crisis.

And trends are expected to continue through 2025. So, if you’re a struggling business owner considering bankruptcy, it’s essential you work with only the most experienced bankruptcy attorneys. 

What’s Causing the Rise in Corporate Bankruptcies?

Many conditions contribute to this perfect storm. Among the most influential are inflation and high interest rates. Rising prices have shifted consumer buying trends and budgets. And the high interest rates paired with higher prices and other recent economic factors have lessened consumer demand putting even more pressure on struggling businesses.

While some industries have been hit harder than others, none have been completely spared. For example, auto parts suppliers are still reeling with supply chain disruption from the pandemic. Companies such as American Tire Distributors, Wheelpros, and Accuride all filed for bankruptcy in 2024.

Current tariffs will likely cause further damage to the industry.  

The restaurant industry also took some major hits in 2024. Red Lobster and TGI Fridays both filed for bankruptcy and the industry continues to battle higher interest rates and inflation in food prices for the coming year.

And with shopping moving increasingly toward online, the retail industry continues to fail. Because of high costs for labor, supplies, and rent, companies such as Big Lots, Express, Party City, The Container Store, Rue21, and Joann were forced into bankruptcy.

Types of Corporate Bankruptcy

If you’re a business owner facing the difficult decision of filing for bankruptcy, insist on only the most skilled and experienced representation that will help you determine whether you’re better suited for a Chapter 7 or Chapter 11 bankruptcy.

Below is a simple breakdown of the two different types.

Chapter 7

A Chapter 7 bankruptcy is the less complicated of the two – though it’s not as common as Chapter 11 because businesses don’t receive debt discharge. Instead, your business is closed and a trustee appointed by the court will review your paperwork, sell off your unencumbered business assets, solicit proof of claim forms from creditors, and distribute the funds to creditors. This ensures there is nothing left for creditors to collect.

Chapter 11

In a Chapter 11 bankruptcy, your company doesn’t close and has a chance for a fresh start through a reorganization plan. This type of bankruptcy is filed by corporations needing  time to restructure debt that has become unmanageable.

It’s important to note that if you file for Chapter 11, you’ll be expected to fulfill your obligations under the reorganization plan. A Chapter 11 reorganization is complex and can be costly so it must be carefully considered. Consulting with a bankruptcy attorney is highly recommended.

There’s an additional reorganization bankruptcy known as Subchapter V Chapter 11 – or “Sub V” for short. It’s available to small business debtors to restructure their debts.  It does have debt limits, which if exceeded preclude a debtor from using this chapter of the Bankruptcy Code. But it’s designed to be more streamlined, less costly, and easier to navigate than traditional Chapter 11.

With a Sub V, you have the right to propose a plan of reorganization to repay some of your debts, keep assets, and remain in business while receiving protection from your creditors. Creditors vote on whether to accept or reject the plan, but the Court can overrule the objections and approve a plan of reorganization. Sub Vs are easier and less costly to navigate. So it may be a better option for you.

You Need Stellar Bankruptcy Lawyers on Your Side

With the rise in corporate bankruptcies, the demand for bankruptcy attorneys has also increased.

So if you’re considering bankruptcy for your business, you should consult with experienced bankruptcy attorneys to find out about your rights under the Bankruptcy Code and to decide what the best course of action is.

The knowledgeable attorneys at Gold, Lange, Majoros & Smalarz, P.C. are here to help. So call 248-462-7698 or contact us online to schedule your free initial consultation with our highly skilled team.