Business filings under Chapter 11 of the federal bankruptcy law rose sharply in March, and attorneys who work with struggling companies are seeing signs that more owners are contemplating the possibility of bankruptcy. The most vulnerable companies include the thousands of restaurants and retailers
NEW YORK — The billions of dollars in coronavirus relief targeted at small businesses may not prevent many of them from ending up in bankruptcy court.
The most vulnerable companies include the thousands of restaurants and retailers that shut down, many of them more than a month ago. Some restaurants have managed to bring in a bit of revenue by serving meals for takeout and delivery, but even they are struggling financially. Small and independent retailers, including those with online stores.
“There is no reliable visibility into when business operations will be able to resume the pre-COVID normal,” Singerman says. The number of Chapter 11 filings rose 18 percent in March from a year earlier, a dramatic swing from the 20 percent decrease in February, according to the American Bankruptcy Institute, a trade organization for attorneys and other professionals involved in bankruptcy proceedings. The numbers don’t break out filings by company size, but given that the vast majority of companies are small to mid-size, it does give an indication that smaller companies are struggling.
Many companies, however, just shut their doors, and that’s likely to be the case again, Singerman says. According to some estimates, 170,000 companies failed during the recession.
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