Many business and banking experts are predicting a brisk year for bankruptcy filings. Here’s what you need to know.
The Old: A Recap of 2019 Bankruptcy Filings and Trends
For the first time in eight years, there was an uptick in bankruptcy filings, including individual and commercial cases. Commercial chapter 11 filings rose 0.36 percent, from 5,482 in 2018 to 5,502 in 2019. Total commercial filings, including both chapter 7 liquidation cases and chapter 11 reorganization cases, increased 2.4 percent, from 5,482 in 2018 to 5,502 in 2019.
As in 2018, the retail sector was perhaps the hardest hit by large commercial bankruptcy filings. There were 23 substantial retail bankruptcy filings in 2019, compared to 17 such filings in 2018. Among the highest profile retail bankruptcy cases were well-known names including Things Remembered, Z Gallerie, Barneys New York, Forever 21, Diesel, Charlotte Russe, Sugarfina, Charming Charlie, Shopko and Destination Maternity. With increasing pressure from online sales, the retail industry is bracing for yet another wave of brick-and-mortar-based filings in 2020. Stationery retailer Papyrus recently filed for chapter 11 and closed all its stores, and the owners of discount hair salon Hair Cuttery just announced 91 store closings.
The New: Small Business Reorganization Act
A new wave of small business bankruptcies is also anticipated in 2020, due to the enactment of the “Small Business Reorganization Act of 2019” (“SBRA”) which goes into effect February 19, 2020. Because chapter 11 bankruptcy reorganizations are expensive and can take years to complete, they have not been a viable option for many small businesses. For eligible small businesses, the SBRA may provide a more streamlined, less expensive and quicker path through the reorganization process. For a more detailed discussion of the SBRA, see the September 10, 2019 Hirschler Bankruptcy Alert, “Impending Changes to the Bankruptcy Code Improve the Ability of Small Businesses to Reorganize and Add Restrictions to Efforts to Recover Preferential Transfers.”
How It Impacts You
If you are a business owner and are struggling with liquidity concerns, high rents, bad contracts or other business issues, a bankruptcy filing may offer a way to reorganize your business and get it back on a path to success. With the enactment of SBRA, small businesses now have a bankruptcy option that promises to be faster, less expensive and more efficient. If your business is facing financial obstacles, please contact one of our experienced bankruptcy attorneys to discuss your situation and the available options.
If you are a lender, commercial landlord, or provider of goods or services to businesses, you may be affected by the bankruptcy of a borrower, tenant or customer. We can guide you through the bankruptcy process, protect your rights and help you maximize your recovery. When you receive notice of a bankruptcy filing, please contact us right away for a consultation to discuss what the bankruptcy filing means for your bankruptcy and how we can protect your rights.
Luis F. Ruiz