Almost 3,600 businesses filed for Chapter 11 bankruptcy in the first half of 2020, marking a rise of 26 percent, The Wall Street Journal reported.
The rise comes as more companies succumb to the financial ills of the pandemic and are looking for protection against creditors, according to legal services firm Epiq Services.
In 2019, there were 2,855 Chapter 11 filings by the end of June, for comparison, marking a 43 percent rise year over year.
New bankruptcy filings have come quick since February, when new rules designed to help small businesses move through the system faster were passed, but the coronavirus pandemic is likely to spur even more in the coming months, WSJ reports, with Paycheck Protection Program (PPP) funds running out and other assistance programs beginning to wear thin as well, according to Dallas-based bankruptcy lawyer Rachel Smiley of the firm Ross & Smith.
She said there could be more cuts coming due to adverse economic conditions.
“We may be on borrowed time for job cuts in a number of industries…that were not necessarily distressed when we entered the pandemic,” she said, according to WSJ.
The bankruptcies so far this year include prominent old department store names such as J.C. Penney and home-goods retailer Pier 1, along with telecommunications company Frontier Communications.
J.C. Penney, once a heavy hitter in the U.S. retail field, finally filed for Chapter 11 in May after several years going back and forth on whether it would happen. The company, facing the common struggles of many old brick-and-mortar retailers such as eCommerce competition, was crippled by the pandemic.
The company was able to reach a deal with most of its lenders that afforded it another $450,000 to stay afloat during its restructuring.
Meanwhile, Golds Gym filed for Chapter 11 in early May, amid a plan to shutter 32 locations. The company said it planned to keep soldiering on.
And vitamin retailer GNC filed for Chapter 11 in a “prepackaged” manner where it agreed to sell the company with the backing of most shareholders.