Commercial Chapter 11 Bankruptcy Filings Are Up; More Filings May Be Yet to Come

By Creditors’ Rights & Bankruptcy and Litigation Practice Groups

The American Bankruptcy Institute (“ABI”) reported today that commercial Chapter 11 business bankruptcy case filings are up 19% from the filings last year for the month of August. The ABI cites increasing trade costs and rising debt loads as continual challenges for businesses to continue operating at a profit and avoid bankruptcy.

Two new bankruptcy statutes enacted on August 23, 2019, may make commercial and agricultural (family farmers and fishermen) bankruptcy case filings increase even more in 2020. The Small Business Reorganization Act of 2019 (HR 3311) makes it easier for small business debtors to reorganize through a specialized, small business Chapter 11 case. The Small Business Reorganization Act of 2019 will not become effective until February 2020. In addition, the Family Farmer Relief Act of 2019 (HR 2336) increased the maximum debt limit for certain agricultural businesses and family farming operations from $3,237,000 to $10,000,00, effective as of August 23, 2019.  We may see more agricultural business filings under Chapter 12 as farm debt continues to rise.

Read more about these statutes here: Small Business Reorganization Act of 2019

And here: Family Farmer Relief Act of 2019

We will continue monitoring case filings and report on industry trends. Please contact our Financial Services Industry Group team with any questions about this article.