The widespread collapse of businesses could happen when economic times take a terrible downturn. The Great Depression saw many businesses close their doors, and don’t assume a similar economic catastrophe becomes necessary to see entrepreneurs rush to file bankruptcy in a Kentucky federal court. Interestingly, despite some recent concerns about financial woes, 2021 did not see a massive increase in businesses filing Chapter 11.
Economic optimism coming out of 2021
The idea of a corporate bankruptcy wave wasn’t necessarily reflective of analysts and those involved with forecasting making overly gloomy assessments. Some financial and market hurdles in 2021 led to reasonable beliefs about a significant number of businesses losing revenue and filing for bankruptcy protection. Federal bankruptcy filings are public records, and the data shows things weren’t so awful in 2021.
History now shows that 2021 had the lowest number of corporate bankruptcy filings in a single year since 1986. 2021 saw 3,596 Chapter 11 cases filed in federal court, a worrisome number on the surface. A closer inspection reveals that number reflects a 24% decline from 2020. So the business community may be healthier than assumed, at least for some.
Not a zero-bankruptcy landscape
While some business leaders and those invested in the market may feel relief at the decreased bankruptcy numbers, more than 3,500 Chapter 11 filings suggest some businesses will lose money regardless of how well other enterprises perform.
Not every industry is the same, either. Companies involved with technology could do poorly while ones focused on retail sales may experience increased revenue. Ultimately, business owners and executives must worry about their companies’ balance sheets, which could suffer even during positive economic times, leading to commercial bankruptcy.
Filing for bankruptcy may provide a way for a business to restructure its debts and survive. Bankruptcy could deliver a viable lifeline to an important business.