A new report is out detailing the number of commercial bankruptcy filings there were in the 2016 calendar year, as well as the total number of bankruptcies in the US. The total number of bankruptcies were down by 6 percent — but within that number, commercial bankruptcies increased a staggering 26 percent in 2016. In 2015, there were 29,920 commercial Chapter 11 bankruptcies. In 2016, that number surged to 37,771.
What is interesting about these figures is that with the Federal Reserve set to increase interest rates in 2017, there will likely be more individuals and companies that will seek the legal shelter of bankruptcy in the coming year as well. Individuals will have Chapter 7 and Chapter 13 options in case this happens to them, and companies will have Chapter 11 (among other options).
Chapter 11 bankruptcy doesn’t have to be a bad thing for companies. In fact, it can often be the opposite. While bankruptcy is not an inherently positive position to be in, filing for bankruptcy buys companies some time to figure out their legal and financial situation. It can even allow them to craft an exit strategy or a reconstruction or reorganization of their business. In these ways, bankruptcy can actually be quite helpful.
Going down this path necessitates legal help, though. With the assets, regulations, deals and contracts that companies have, a bankruptcy can quickly become a behemoth of a legal problem without an experienced attorney.
Source: ABL Advisor, “Commercial Bankruptcy Filings Rise 26% in 2016,” Jan. 6, 2017
