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In recent years, bankruptcy has become a common occurrence for businesses of all sizes. This week, data compiled by Bloomberg revealed that there was a significant increase in major corporate bankruptcies during a three-day period, making it one of the busiest on record. The trend of rising bankruptcies, including consumer, small business, and big corporates, has been steadily climbing over the past 20 months.

The causes behind this increase are varied and multifaceted. Higher interest rates and a decrease in consumer spending have been attributed to the rise in bankruptcies according to Michael Hunter, vice president at Epiq. Additionally, pre-bankruptcy deal-making has become more common among companies seeking restructuring, with the goal of reducing costs and the time required under court supervision.

Despite the increase in business bankruptcies, bankruptcy lawyer Derek Abbott notes that this doesn’t necessarily indicate broader economic trouble. He has seen a rise in restructuring work in recent months, even as the US economy avoided predictions of a recession when the Federal Reserve increased interest rates. Abbott highlights that certain sectors such as telecom, retail, and pharmaceutical are facing challenges that contribute to the rise in bankruptcy cases.

Commercial insolvencies also saw a significant jump of 43% in the first three months of 2024 compared to the same quarter the previous year. Michael Hunter anticipates that filings will continue to rise throughout the year due to these challenges faced by various sectors. Despite these challenges, it is important to remember that bankruptcy is not always an end but rather an opportunity for companies to restructure and emerge stronger than before.

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