September 2024: Recent Developments in the Realm of Bankruptcy and Restructuring

In an effort to keep you apprised of what’s happening in the realm of bankruptcy and restructuring, here are four recent developments to be aware of.

1. According to data from Epiq AACER, commercial bankruptcy filings ticked up again in August 2024, increasing 9% from 2,356 in July to 2,562. Meanwhile, commercial Chapter 11 filings grew more aggressively, up 21%, from 511 filings in July to 616 in August.

2. Big Lots became the latest retailer to file for bankruptcy in 2024, continuing this year’s trend of many large national retailers and restaurant chains—including Rite Aid, Express, and Red Lobster—entering Chapter 11. One reason these types of companies opt for bankruptcy is to deal with long-term, often above-market, commercial leases, which can be rejected in bankruptcy.

3. Bloomberg Businessweek reports that US consumer borrowing increased to $25.5 billion in July, the most since November 2022. The jump reflects both non-revolving debt and credit card balances. While borrowing can prop up spending and retail sales in the short term, more consumer debt can lead to less spending in the future—possibly leading to even more distress for consumer discretionary companies.

4. A subcommittee under the US Judicial Conference’s Advisory Committee on Bankruptcy Rules asked that the full group delay discussing a proposal to create a rule to curb "judge shopping" in large Chapter 11 cases because, according to reporting from the WSJ, another committee is considering a similar issue. Law360 notes that the subcommittee’s memo also stated the proposal may violate national statutes that allow each bankruptcy court to decide how to assign cases. This issue will need to be addressed when the committee revisits the proposal.