U.S. corporate bankruptcies reached their highest level since the 2008 financial crisis as Americans tighten their belts. Companies have increasingly struggled with rising debts, driven by high interest rates that have caused borrowing costs to spike.
In 2024, 686 companies filed for bankruptcy, marking an 8 percent increase from 2023 and surpassing the total filings of 2021 and 2022 combined. This figure represents the highest number of filings since 2010, according to data from S&P Global Market Intelligence.
Additionally, last year, more companies attempted to avoid bankruptcy through out-of-court actions, with these efforts outnumbering actual bankruptcies two to one, as reported by Fitch Ratings.
One of the most significant bankruptcies of the year was Party City, which filed for Chapter 11 for the second time in just over a year. The company announced it would close all 700 of its stores, attributing this decision to inflationary pressures and a decrease in consumer spending—trends that are common among other struggling businesses.
Other major names, such as Tupperware, Red Lobster, and Spirit Airlines, also filed for bankruptcy in 2024. Even the popular vodka brand Stoli filed for bankruptcy in November.
“The persistently elevated cost of goods and services is weighing on consumer demand,” said Gregory Daco, chief economist at EY, in an interview with the Financial Times. He noted that these pressures are affecting lower-income families the most.
While the Federal Reserve has started lowering interest rates, relief for businesses will be limited. Forecasts suggest only a half-point rate cut in 2025, keeping pressure on struggling companies.
Between 2021 and 2022 – when borrowing costs were low and Americans were still spending stimuls checks – only 777 bankruptcy filings were recorded.
According to the Daily Mail, That is a a stark contrast to the 636 bankruptcy filings in 2023 and the 686 in 2024.
At least 30 of last year’s bankruptcy filings involved firms with over $1 billion in liabilities, underscoring the scale of the financial strain.
A rising number of businesses have turned to ‘liability management exercises’ -financial tactics aimed at avoiding bankruptcy by restructuring their debts.
While these moves have become increasingly common, experts warn they are often just a temporary fix and can lead to companies eventually filing for bankruptcy anyway.
Joshua Clark from Fitch Ratings explains that these moves can hurt lenders, as they typically mean taking on more debt and pushing a company closer to collapse.
The most high-profile bankruptcies have been among restaurant and retail chains – especially those with locations across America.
As of December 20, Coresight Research tracked 48 retail bankruptcies in the US compared with 25 during the same period a year ago.
And at least 22 restaurant chains filed for bankruptcy this year, the highest number since 2020, according to BankruptcyData, a company that tracks filings.
The highest profile restaurant was Red Lobster, which filed for bankruptcy in May but emerged as a going concern after shuttering almost 100 restaurants. READ MORE
