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Corporate bankruptcies are edging back up after a two-year lull as pressures in the economy grow, a situation sure to worsen if the nation’s political leaders fail to reach a deal to prevent the government from defaulting on its debt, The Washington Post reported. The increase is most visible among large companies, where there were 236 bankruptcy filings in the first four months of this year, more than double 2022 levels, according to S&P Global Market Intelligence. Several large recognizable companies with hundreds or thousands of workers have filed for bankruptcy protection in recent weeks, including Bed Bath & Beyond and Vice Media, although their financial troubles predated the recent economic turmoil. Among all types of companies, large and small, the increase in bankruptcies is much more muted, with filings remaining below pre-pandemic levels and historic norms, according to Mark Zandi, chief economist at Moody’s Analytics. The total numbers are still “very, very low,” he said. If the U.S. defaults, will it miss Medicare payments? What about Social Security? Filings are creeping up as interest rates rise, pandemic-era government support dries up and sales growth slows amid a cooling economy. Any failure to reach a deal on the debt ceiling and avoid a government default would clearly worsen the problem, Zandi said. Even a short-lived failure to pay government debts would push the economy into recession, he said. Any long-lasting default would be “catastrophic” and cause a “tsunami of bankruptcies,” he added. (Subscription required.)

On April 19, 2023, the Boy Scouts of America (BSA) exited its bankruptcy case after clearing one of the last legal hurdles in its way, The Spectrum reported. Some insurance companies and sex abuse claimants objected to the Boy Scouts’ plan to pay claimants, but the Third U.S. Circuit Court of Appeals held that the plan can go ahead anyway while the insurers’ appeal is pending. It’s now possible to begin the process of paying at least US$2.45 billion to resolve about 82,000 claims against the Boy Scouts and affiliated entities asserted by people who allege that they were sexually abused as children over the past 80 years. The Boy Scouts operate through the national organization, which includes hundreds of separate but affiliated organizations known as local councils, and faith-based or civic groups called chartered organizations. Because these troop-sponsoring nonprofit organizations across the country are responsible for ensuring the safety of children in scouting, all of them faced child sexual abuse claims. The BSA filed for bankruptcy in February 2020 to halt the hundreds of lawsuits that were then pending in state courts. More than two years later, the BSA reached an agreement with many of its insurers, all of the local councils, some of the chartered organizations and roughly 85% of all sex abuse claimants on a plan to pay claims. The Conversation asked <b>Marie T. Reilly</b>, a Penn State law professor who studies bankruptcy cases involving child sex abuse claims against Catholic dioceses, to explain what this means. Read on for a Q&A with Prof. Reilly.