Business bankruptcies pick up again

Dive Brief:

The total number of U.S. commercial bankruptcy filings rose 18% to 12,107 in the first half of 2023 compared to the period earlier, with one of the biggest jumps seen in Chapter 11 filings that soared 68% in the period to 2,973, according to a release from Epiq Bankruptcy.
Small business bankruptcies, captured as Subchapter V elections or a type of Chapter 11, also saw a 55% jump in filings to 814 over the period, though that stemmed from changes in the law that increased the eligibility filing limits, according to the release.
“The growth in filings is reflective of more families and businesses facing surging debt loads due to rising interest rates, inflation, and increased borrowing costs,” American Bankruptcy Institute’s Executive Director Amy Quackenboss said in a statement.

Dive Insight:

The rise in bankruptcies follows a shift seen late last year as total commercial filings ticked up in December by 1% to 1,712 after commercial filings declined in the full calendar year 2022 by 5% to 21,396.

In a January release, Quackenboss explained that steep bankruptcy filing declines abated in 2022 as pandemic assistance programs and lender forbearance receded while interest rates, inflationary pressures and debt loads grew.

The rise in business failures in the first half of the year is the latest piece of H1 economic data filling out a somewhat mixed picture of the year’s business performance to date.

Among the data: the volume of deals worldwide valued at more than $100 million plunged 37% to just 280 during the first half of this year, undercut by rising interest rates and a gloomier outlook for the global economy, Willis Towers Watson said Thursday.

At the same time, there was some improvement in the initial public offering market. U.S. IPOs during the first half of 2023 raised $8.8 billion, an 87% jump compared with the same period last year but only about one-tenth the $84.2 billion surge in IPO proceeds during the first six months of 2021, CFO Dive previously reported.

Weakness in the retail sector has led to some of the filings, with home-goods retailer Bed Bath & Beyond and party-goods manufacturer and distributor Party City among this year’s larger bankruptcy cases.