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No Olivia Rodrigo, but it’s brutal out there.
Bankruptcy filings jumped across all major US categories in the first quarter of 2024, per a new report from Epiq Bankruptcy, which provides bankruptcy filing data.
According to Epiq, March marked the 20th consecutive month that total, individual, and commercial bankruptcy filings posted year over year increases.
The biggest jump: commercial Chapter 11 filings. Those increased 43% YoY in Q1, with 1,894 filings. Last year, businesses filed 1,325 commercial chapter 11s in Q1, according to Epiq.
In all, commercial bankruptcies jumped 22%, from 5,820 in Q1 2023 to 7,113 this time around. And small business filings, or Subchapter V cases, climbed to 606, a 30% increase from last year’s 465.
“As we expected, the upward trajectory in both commercial and individual related bankruptcy filing volumes continue,” Michael Hunter, VP of Epiq AACER, said in a statement.
Hunter cited “the higher cost of funds and interest rates, a reduction in consumer discretionary spending, higher housing costs, and a continued drawdown of excess savings” as primary drivers of this upward trend, noting that he thinks the surge will continue for the rest of 2024.
For anyone looking for signs of an economic soft landing in market data, it’s not exactly ideal.
But not everyone is totally pessimistic. Chris Ward, bankruptcy and restructuring chair at Polsinelli law firm, told CFO Dive that “Q1 ’24 signals that economic distress is stabilizing.”
While the jump in filings “indicates that certain aspects of the market did have some difficulty with higher interest rates,” Ward noted that “overall the economy remains strong and companies are digging in their heels for a long and slow recovery.”
“Companies with strong balance sheets are prepared for prolonged interest rates. Ones that were struggling prior to the implementation of higher rates will continue to struggle and we will likely see an increase of Chapter 11 bankruptcy filings,” he said.
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