Tag: Bankruptcy

In a landmark 5-4 decision in Harrington v. Purdue Pharma that will significantly reshape corporate bankruptcy practice, the U.S. Supreme Court resolved a circuit split regarding the authority of a bankruptcy court to approve releases in favor of non-debtor entities without the consent of impacted third parties. Reversing the decision of the Second Circuit, the Supreme Court’s narrow majority held that such non-consensual releases—other than in the context of asbestos-related claims—are not authorized under the Bankruptcy Code. 

The “big” win: In a decision that helps balance Subchapter V’s pro-debtor provisions, the U.S. Court of Appeals for the Fifth Circuit recently held that the Bankruptcy Code’s exceptions to discharge apply to a corporate Subchapter V debtor with a nonconsensual plan (even though the exceptions do not apply to corporate debtors in “traditional” Chapter 11 cases).

Total bankruptcy filings increased 18% year-over-year in 2023—likely due to high interest rates, maturing business loans and inflation. Chapter 11 bankruptcies increased 72% year-over-year and Subchapter V filings rose 45%, according to a report from Epiq. “While representing a substantial year-over-year increase, total bankruptcy filings remain lower than the pre-pandemic total of 757,816 recorded in CY2019,” the report reads.

Commercial bankruptcies have skyrocketed since the historical lows during the height of the pandemic. At 236 corporate bankruptcy filings so far this year, the number is higher than the first four months of any year since 2010 and more than double 2022 levels, according to S&P Global Market Intelligence. They forecast that the U.S. default rate will rise to 4.25% by the beginning of next year, up from 2.5% currently—or to 6.5% if there is a serious recession.