It should come as no surprise to anyone following the economic impacts of the COVID-19 pandemic that many businesses do not expect to make it through the end of 2021. Business bankruptcy trends will likely include a lot of companies filing in the upcoming year.
Many struggling businesses already and had filed Chapter 11 bankruptcy prior to lockdowns, but the last several months have pushed them over the edge financially. Others that were doing moderately well before the pandemic are now considering filing for bankruptcy in 2021. This is especially true for businesses that took on additional debt during 2020.
Economists consider this “in-between time” like the eye of a hurricane. Things might seem calm after a year of upheaval, but they expect rougher times ahead. They point to the volume of new debt accumulated during the pandemic by businesses. More debt means weaker businesses and weaker industries overall. Many will need to restructure in the coming months and years to give themselves even a slight chance at survival.
Chapter 11 bankruptcy involves the reorganization of a debtor’s business affairs, debts, and assets. Corporations use it most often, but occasionally smaller entities including individuals use it. It’s the most complicated type of bankruptcy and usually the most expensive.
To learn more about Chapter 11 bankruptcy law, check out this information.
The industries expected to be most affected should come as no surprise to anyone. Travel and transportation, energy, real estate, healthcare, hospitality, and retail have all been affected. There was already a big uptick in restaurant and retail Chapter 11 cases throughout 2020.
Some are calling 2021 a year of “critical decision making” for businesses in the industries most affected by COVID restrictions. Many retailers even intend to use the cash brought in from end-of-year holiday sales to fund their restructuring.
Financial experts expect that businesses not relying on foot traffic, travel, or retail sales will also face a reckoning in 2021. The energy industry will face many changes in the coming months and years with ongoing efforts to reduce fossil fuel emissions. Traditional coal, gas, and oil companies will have less access to financing and will have to adjust or find a way to survive in an unfriendly market.
And though it’s booming now, the real estate market should see a downturn as the difficulty in other industries will eventually affect it too. Additionally, the shift to working-from-home will continue to impact the commercial real estate market well into 2021 and likely beyond. Although many companies say they will move back into their offices once the pandemic passes, many are expected not to.
Business and commercial bankruptcy is much different than personal bankruptcy, especially Chapter 7. But the two affect one another. Changes in the economy affect individuals and have a significant impact on the job market. It’s likely that as businesses struggle and turn to reorganization, there will also be an uptick in personal bankruptcies.
If you’ve already been affected by the changes that occurred throughout 2020 or you want to speak to someone about what you can do now to protect yourself from increasing financial challenges in the coming year, we can help. Contact the bankruptcy law firm Law Office of Robert M. Geller at 813-254-5696 to schedule a free consultation.
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