Corporate bankruptcies in the United States are currently at a 15-year high, a trend that began to accelerate in 2025. This surge is driven by a combination of factors, including higher interest rates, tighter credit conditions, and increasing costs for labor and goods.
Rising Rates and Financial Strain
Increases in interest rates and the cost of capital have created financial pressure on many companies. Businesses are attempting to manage these pressures by taking on more debt or restructuring existing debt, seeking more time to navigate economic challenges. This is particularly evident among mid- to small-size companies filing for Chapter 11 bankruptcy.
Industry Impacts
Whereas the overall economic situation isn’t comparable to the Great Recession, the increase in bankruptcies is concentrated in specific industries. Retail, hospitality, and real estate are experiencing particularly high rates of filings. Commercial landlords and businesses are still grappling with post-COVID space needs, contributing to difficulties in the real estate sector.
Liability Management Transactions
Alongside direct bankruptcy filings, companies are increasingly utilizing liability management transactions (LMTs) to address financial distress. These transactions reached record levels in 2024, with 46 completed, and continued at a high pace with 27 completed in the first half of 2025.
Mega Bankruptcies on the Rise
Large corporate bankruptcy filings – those involving companies with assets exceeding $100 million – have increased for the third consecutive year. There were 117 such filings in the 12 months ending in the first half of 2025, a 44% increase compared to the 2005-2024 average. Mega bankruptcies, defined as filings by companies with over $1 billion in reported assets, also increased to 32 over the past year.
Frequently Asked Questions
Why are companies filing for bankruptcy now?
A combination of factors is contributing to the increase, including higher interest rates, tighter credit, and rising costs for labor and goods. Companies that took out loans at low interest rates are now facing increased costs as rates rise.
Which industries are most affected?
Retail, hospitality, and real estate are currently experiencing the highest rates of bankruptcy filings. These industries are facing unique challenges related to changing consumer preferences and post-COVID economic shifts.
What are liability management transactions?
Liability management transactions are out-of-court restructurings used by companies to address financial distress. They have reached record levels recently, indicating a preference for resolving financial issues outside of formal bankruptcy proceedings.
As economic conditions continue to evolve, what strategies do you think businesses will employ to mitigate financial risks and ensure long-term stability?
