The number of business and personal Chapter 11 bankruptcies shot up to 2,973 during this year’s first five months, a 68-percent increase from the 1,766 in the same period in 2022, data service Epiq Bankruptcy reported on 3 July.
Bed Bath & Beyond, Envision Healthcare, Lordstown Motors, Party City, and SVB Financial Group were among the most high-profile businesses driven to failure by “decades-high interest rates and sticky inflation as the era of easy money drew to a close,” Reuters said.
Small-business filings were up 55 percent.
“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,” Amy Quackenboss, the American Bankruptcy Institute’s executive director, said in a public statement.
The U.S. Federal Reserve raised interest rates 10 times since March 2022, bringing its loan rate from 0.25 percent to 5.25 percent in 10 consecutive hikes. The bank is expected to raise rates twice more this year.
Chapter 11 bankruptcy allows an entity to wipe out most debts. Chapter 13 bankruptcies, which allow a person or business to pay off existing debts over time, were up 23 percent.
TREND FORECAST: With interest rates rising, layoffs increasing, and core inflation stuck above 5 percent, the number of bankruptcies will continue to increase. A recession will add even more fuel to this financial fire. Again, the worst is yet to come!