2024 was a record year for bankruptcies. Why?
There were a lot of companies that filed for bankruptcy last year — 694 of them. That’s up 8% from last year. And that makes it the most filings for bankruptcies in the U.S. since 2010, in the wake of the Great Recession, according to S&P Global Market Intelligence data.
Bankruptcies typically happen after financial crises, but usually they’re delayed, said Brook Gotberg. She teaches bankruptcy at Brigham Young University Law School.
“It’s typically a reasoned decision after they’ve tried a bunch of other things and those other things haven’t worked out,” she said.
The shock this time was the pandemic. Gotberg said the bankruptcies were delayed because of government payouts and PPP loans that helped companies survive. But then came higher interest rates.
“Because bankruptcy is a particular tool for a particular problem, which is debt,” she said. And debt comes with interest.
The other problem is inflation, said Jared Ellias, who teaches corporate bankruptcy law at Harvard Law School.
“A lot of consumers find themselves spending more money for things than they expected to which then, you know, changes the way they shop. It changes the way they live,” he said.
Ellias and Gotberg both expect the bankruptcy filings to continue creeping up. But they said that will depend largely on how the Federal Reserve handles interest rates and the new Trump administration’s policies.
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