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ANALYSIS: Are Chapter 11s on the Rise—Or Just Holding Steady?

Sept. 30, 2022, 9:01 AM

Bankruptcy and restructuring attorneys tend to thrive in economically chaotic times, but 2022—despite its market mayhem—hasn’t necessarily delivered with respect to new Chapter 11 cases.

While the past four months (with the exception of July) have been busy in terms of Chapter 11 petition totals, a closer look reveals that actual Chapter 11 activity has been relatively steady all this year. When using Chapter 11 filings as a measure of distress, it’s important to take a look behind the numbers because affiliate filings can obscure the actual caseloads, as this year has demonstrated.

A company that files Chapter 11 typically initiates a case for the company plus cases for its subsidiaries and affiliates. These cases are ordinarily jointly administered under a single lead or main case. A major case with hundreds of affiliate cases can misleadingly inflate a monthly total.

A great example of this is the month of August, which had a total of 463 Chapter 11 filings. At first glance, the total seems to show a significant increase in Chapter 11 activity over other months this year, representing one of the highest monthly totals. However, August had 185 affiliate cases, primarily related to the Endo International bankruptcy. When we remove August’s affiliate cases, the total drops to 278, still one of the highest monthly totals this year, but not significantly higher than other months.

September is the second busiest month for Chapter 11 filings so far this year— discounting affiliate cases—with 285 lead and stand-alone cases as of 5 p.m. EDT on Sept. 29. However, like August, September’s total isn’t substantially higher than the typical monthly lead and stand-alone totals so far.

Bankruptcy boom times aren’t exactly here—yet.

For more Chapter 11 filings trends, venues, law firms, judges, preference litigation, Subchapter V trends, plan confirmation speed and more, download our free Chapter 11 Petitions and Litigation Midyear 2022 Report, here (for subscribers) and here (for non-subscribers).

Resources for understanding Chapter 11 are available in our Practical Guidance: Voluntary Chapter 11 suite.

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