Corporate Bankruptcies Are Rising At A Concerning Rate—What To Do If Your Company Has Filed For Bankruptcy

There have been more than 230 corporate bankruptcy filings in the United States in 2023, according to the latest market intelligence data from S&P Global. This is more than double the number of filings in the same period in 2022, and the highest number of filings since 2010. The uptick in bankruptcies is attributed to several factors, including rising inflation, supply chain disruptions, interest rate hikes by the Federal Reserve and a recent clawback on bank lending.

S&P Global data shows the first two months of 2023 registered the highest total for any comparable period since 2011, with companies filing 57 bankruptcy petitions in February and 54 in January. The high monthly bankruptcy counts in 2023 follow a historically slow year in 2022.

Companies That Filed For Bankruptcy

Last month, at least seven large companies filed for Chapter 11 bankruptcy protection in less than 48 hours—the largest number of filings on record during a two-day period since at least 2008, according to Bloomberg-compiled data on companies with at least $50 million of liabilities. The breakneck pace of restructurings included once-hot digital broadcaster Vice Media. The company sported a hefty $6 billion valuation in 2017. However, its bankruptcy filing showed Vice had assets and liabilities worth between $500 million and $1 billion.

The sectors hit hardest by bankruptcies so far in 2023 are consumer discretionary, industrials, financials and healthcare.

Here is a list of notable companies that filed for bankruptcy protection in the United States in 2023, according to Intellizence

• Diebold Nixdorf
• Incora
• Qualtek Services
• Plastiq
• Venator Materials
• Envision Healthcare
• Kidde-Fenwal
• Vice Media
• INAP
• Jenny Craig
• Bittrex
• Bed, Bath & Beyond
• Whittaker Clark & Daniels
• Meridian Restaurants Unlimited
• Pear Therapeutics
• Legacy Cares Inc.
• Virgin Orbit
• Codiak BioSciences
• SVB Financial
• HyreCar
• Diamond Sports Group
• Zugo
• LexaGene Holdings
• Akorn Pharmaceuticals
• Starry Group Holdings
• Tuesday Morning
• JDI Data Corp.
• Lucira Health
• Independent Pet Partners
• Placer Academy Schools
• Avaya Holdings Corp.
• Sorrento Therapeutics
• Cash Cloud
• Loyal Companion
• Emergent Fidelity Technologies
• Invacare
• Genesis Global Capital

What Does It Mean When A Company Files For Bankruptcy

Companies file for either Chapter 7 or Chapter 11 bankruptcy if they cannot pay their debts. Chapter 7 liquidates the company's assets, while Chapter 11 allows the business to continue to operate under a reorganization plan.

Businesses file for bankruptcy for various reasons, including general economic weakness, operational conflicts, ineffective business strategies, increased competition, regulatory changes, litigation, personal issues and loss of critical employees. Bankruptcy allows companies to restructure their debt and reorganize their affairs to maximize the amount paid to creditors.

What Happens To Workers

When a company files for bankruptcy, it can significantly impact its workforce. The fate of employees depends on the type of bankruptcy filed. If the company files for Chapter 7 liquidation, it no longer intends to operate its business, and the assets will be sold to pay off the creditors. In this case, workers may lose their jobs.

However, if the company files for Chapter 11 bankruptcy, it is often the result of significant financial distress that hinders its ability to sustain profitability, meet the obligations on its debts and ultimately continue to operate in its current state. A debtor's intent in declaring Chapter 11 bankruptcy is to undergo a reorganization of its affairs and restructuring of its debts, so that it can maximize the amount paid to its creditors. In most cases, the company remains open and operating, and employees may keep their jobs. If the employee is laid off during the Chapter 11 bankruptcy, the court will likely order that they be paid promptly, considering them an “administrative expense” of the bankruptcy estate.

In a Chapter 11 bankruptcy, employees may be able to keep their group insurance coverage, but the company may drop its employee insurance benefits, cut employees' hours or lay people off.

Employee pensions may also be impacted. If the company files for Chapter 7 liquidation, the employees' pensions will likely be terminated. However, if the company files for Chapter 11 bankruptcy, retirement plans that are ERISA-qualified will be protected under the laws of all states and will not be included as an asset in the bankruptcy. Unfunded employer obligations may or may not be paid into the plan, depending on the specifics of the default. If the pension plan is terminated, all contributions to the plan are considered fully vested.

Generally, employee benefits are protected even if the employer files for bankruptcy protection, but employees should contact the administrator of each plan or their union representative to request an explanation of the status of their plan or benefits.

Here are some additional tips for employees of companies that have filed for bankruptcy

• Keep track of your pay stubs and other employment records. This information will be important if you need to file for unemployment benefits or sue the company for wrongful termination.
• Document any changes to your work hours, pay or benefits. This will help if you need to prove that the company has not been fulfilling its obligations.
• Stay in contact with your union or employee representative. They can help you understand your rights and options under the bankruptcy laws.
• Start looking for a new job. The company may be forced to lay off employees to save money.
• File for unemployment benefits. You may be eligible for benefits if you are laid off or furloughed.

Bankruptcy can be a difficult time for employees, but by taking these steps, you can protect yourself and your family.