Financial Insolvency Patterns and Recommendations for Middle-Market Business Leaders

Bankruptcy Patterns and Recommendations for Middle-market Business Heads

In the first half of 2025, U.S. corporate bankruptcy filings have reached their highest level since 2010, reflecting financial distress across various sectors. The default risk for U.S. firms has reached 9.2%, a clear indication of challenging credit conditions.

The industrials and consumer discretionary sectors have been particularly hard-hit, with the consumer discretionary sector seeing 49 corporate bankruptcies and the industrials sector recording 58 filings during the same period. Other industries showing signs of severe early warning default risk include media, technology, utilities, natural resources, transportation, healthcare, energy, and aerospace and defense firms.

Amid this turbulent economic landscape, some organizations may find that undergoing corporate restructuring can help them regain a steady financial footing. Chapter 11 bankruptcy, a strategy used by distressed companies to restructure and restore their balance sheets, is one such option. Subchapter V of Chapter 11 bankruptcy, created by the Small Business Reorganization Act of 2019, has been on the rise in the past few years. Smaller enterprises often find this option beneficial due to lower fees, fewer procedural hurdles, and a quicker time schedule.

The debt eligibility limit for subchapter V bankruptcy is typically no more than $3,024,725, but during the pandemic, it was increased to $7,500,000 under the CARES Act. It's important to note that the information provided is not legal advice and should not be considered a substitute for advice of counsel on any specific matter.

Jonathan Carson, a former corporate restructuring attorney and co-CEO at Stretto, a legal technology and services firm, emphasises the importance of understanding U.S. bankruptcy laws. He advises companies to understand their options and be prepared to weather any number of storms brewing around the American economy.

Businesses considering bankruptcy should engage competent and experienced legal counsel and/or financial advisors to determine the best path forward. The Forbes Business Council, a growth and networking organisation for business owners and leaders, may provide valuable insights and connections in this regard. However, the search results do not provide the name of the founder or founding members of the Forbes Business Council.

The outlook for the economy remains unclear with the prospect of new tariffs, high borrowing costs, and inflation, leading to continued corporate defaults and restructuring across various industry sectors. It's crucial for businesses to stay informed and proactive in these challenging times.