A Tidal Wave of Bankruptcies is Coming

Source: New York Times

This year, regardless of economic trends in coming months, the number of filings for mega bankruptcies ($100 billion) is expected to surpass any since the Great Depression, and the amount of filings over $100 million will challenge 2009 statistics, largely due to the coronavirus pandemic.

Large companies including J. Crew, Hertz, Whiting Petroleum, and Diamond Offshore Drilling are facing serious economic issues, plunging into debt and making bankruptcy court their next action. However, with an influx of large and mega bankruptcy cases, there runs the risk of swamping the court system, making it even more difficult to save small businesses.

Typically, after a bankruptcy filing, a restructuring and payment plan is established for these companies to pay off debts in times of crisis. If a plan is not decided or not successful, the company in question will most likely be liquidated and go out of business. This is the fate of small businesses if the courts are overrun with cases from larger companies. 

Without a reform in the courts, many small businesses will disappear along with their employment opportunities, thereby worsening the most disastrous economic downturn since the Great Depression. Many companies were in economic trouble before the pandemic, relying on the conservation of amassed cash, but this cash storage for many is running low. 

Many experts are advocating for a system reform for the time being, such as extending the period during which companies can come up with payment plans and increasing budgets to rehire retired judges and clerks. However, we have seen in the past that the longer a company is in a period of bankruptcy, the higher the chance of complete liquidation. The current state of affairs is posing a very negative future for debtors and creditors in a very unstable national economic condition.

Do you have questions about personal or commercial bankruptcy, or how these current trends will affect you? Visit www.scolnicklaw.com/bankruptcy or call us at (718) 554-6445.