2025 is shaping up to be a busy year for US corporate bankruptcy filings. In June, there were 63 new bankruptcy filings from both public and private companies. The last year that bankruptcy filings were this high was 2010, and there are multiple reasons for this recent uptick. Borrowing costs remain high as the Federal Reserve held benchmark interest rates at their current elevated levels due to persistent inflation. As corporate liquidity has worsened, debt levels for many companies have risen. To make matters worse for some corporations, consumer spending is strained due to a cooling job market. All of this has made it harder for companies to make timely debt payments to their creditors.

At the time of filing in June, five companies had more than $ 1 billion in liabilities. Many of these companies operate in the renewable energy sector who listed macroeconomic challenges and legislative changes in regards to tax credits as additional reasons for their financial troubles. Some tech companies also stated that a focus on growth and cash flow over debt service contributed to their bankruptcy. Overall, industrial and consumer discretionary companies have dominated the current uptick in corporate bankruptcy filings. 

Discussion questions:

  1. Describe what happens to a company’s assets when it goes bankrupt, and who are first in line for repayment in the case of such a bankruptcy
  2. Make a list of possible reasons why U.S. corporate bankruptcies are on the rise and discuss which reason(s) you think is the most important one.