Inflation, rising interest rates and geopolitical tensions place emphasis on businesses.
According to the American Bankruptcy Institute (ABI), it filed for Chapter 11 bankruptcy protection in March, starting in March, indicating the economic stress of US businesses.
“We are pleased to announce that we are committed to providing a comprehensive range of services,” said Michael Hunter, vice president of bankruptcy data provider EPIQ Aacer.
Individual filings rose 13% last month. Hunter said credit card delinquency is close to 10 years high, and factors such as interest rates and debt burden are factors that contribute to the problem.
The federal Housing Administration’s mortgage portfolio’s late rate has risen to 11%, “beyond pre-pandemic levels,” he said.
“Added to this, government work layoffs threaten to exacerbate the financial instability of federal workers who rely on stable incomes on debt.”
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“Bankruptcy provides an established process for struggling households and businesses looking to access a fresh start to finance,” she said.
In a court application, restructuring director Jonathan Tibbs said the restaurant chain’s operations have been negatively affected by macroeconomic factors in recent years.
“Casual dining restaurants are strongly influenced by consumer sensitivity to eating out by consumers, and due to inflationary pressures, restaurant menu prices across the industry are rising significantly faster than groceries and other consumer prices,” the court filing said.
Corporate bankruptcy
According to a January 7 report from S&P Global, US corporate bankruptcies jumped to 2024 at 14 highs. S&P analysis only considers bankruptcies, including large companies with specific assets and liability thresholds.
Last year, there have been 694 such corporate bankruptcies, up from 635 in 2023 and 372 in 2022. Some of the well-known bankruptcy filings were created by Tupperware Brands Corp., Party City Holdco Inc., Spirit Airlines, Big Lots Inc. and Steward Health Care System LLC.
The consumer discretion sector saw the maximum number of filings, followed by industry, healthcare, consumer staples and information technology.
“Companies continued to face pressure from interest rates that rose in 2024. In particular, non-financial credit rating companies’ total liabilities reached quarterly records, reaching quarterly records of $8.453 trillion, with interest coverage weakening in the third quarter of the year,” the report said.
After analyzing clients’ payment behaviors, it turns out that only 3% of businesses are discovering accurate signs of trouble. The company said this is important as sudden changes in customer payment behavior tend to occur before bankruptcy.
Steve Carpenter, Chief Operating Officer handling Creditsafe’s North American Operations, said the study underscored the need to provide appropriate training to finance teams to tackle the issue.
“It’s not just why it’s important to regularly review and analyze customer’s past trade payment data. It’s very important, but it also needs to provide useful tips and training. That’s why financial teams can pinpoint problematic patterns that show the likelihood of cash flow issues and time lag,” he said.
“If not, businesses will continue to miss a clear red flag and misunderstand. They will wholeheartedly cost them in terms of the time it takes to chase unpaid invoices and the negative impact it will have on the bottom line.”
