Nearly a year since coronavirus-related shutdowns began affecting large swaths of the American economy, more businesses are filing for bankruptcy as court records show that chapter 11 filings were up nearly 20 percent in 2020 compared with the previous year, the Washington Post reported. Data on a subset of businesses ― those registered as corporations ― shows that some sectors are faring much worse than others, with restaurants, retailers, entertainment companies, real estate firms and oil and gas ventures filing for protection in far greater numbers than in previous years, according to New Generation Research. Bankruptcies filed by entertainment companies in 2020 nearly quadrupled, and filings nearly tripled for oil and gas companies, doubled for computer and software companies and were up 50 percent or more for restaurant owners, real estate companies and retailers, compared with 2019, data from the research firm shows. Among those industries most affected, there were 5,236 chapter 11 filings in 2019 but 6,917 last year, a tally at least 30 percent higher than any of the previous four years. Because bankruptcy filings lag other signals of economic distress, experts say the worst may be yet to come. Bankruptcies stemming from the 2007 financial crisis didn’t peak until 2010. “Bankruptcies don’t cause damage to the economy," said Ed Flynn, a consultant to the American Bankruptcy Institute. "The damage has already occurred when the bankruptcy is filed. Higher bankruptcies are more a symptom of economic harm than the cause.” Read more.
Be sure to read Ed Flynn's exclusive analysis of weekly filing trends on ABI's COVID-19 Resources website.
