The United States saw a significant rise in corporate bankruptcies in 2023. Statistics show the healthcare sector was the hardest hit.
According to Debtwire’s Restructuring Insights, bankruptcy filings rose to 58 percent in 2023. There were 282 bankruptcy filings in the year, a 103-percent increase from the 179 in 2022. The figures show that the United States economy could be doing better.
The Major Cases
Bankruptcies in the healthcare sector rose to 117 percent. Cases from that sector alone represent 21 percent of all bankruptcy filings in 2023.
There were two specific cases: Envision Healthcare and Aukumin. The former requested bankruptcy protection for its $9.4 billion debt, while the latter had over a billion dollars in debt.
According to Catherine Corey, the head of restructuring data, those leading issues defined the restructuring landscape in 2023. They highlighted the persistent issues in the healthcare industry.
Particularly, declining patients, staffing shortages with an increasing demand for higher wages, and inadequate reimbursements from Medicaid and Medicare aggravated the sector’s unending financial challenges.
The Effect on the Real Estate Sector
The real estate industry closely followed the healthcare sector in the number of bankruptcy filings in 2023. The industry filed 11 percent of the total cases in the year.
The biggest hit in the sector was Chinese real estate company Evergrande, which filed for Chapter 15 bankruptcy protection in Manhattan. The company reported $38.86 billion in debt.
WeWork was another real estate victim. The longsuffering office-sharing giant also filed for bankruptcy in 2023. Their case was an unimaginable fall from grace, as the firm once had an estimated value of $47 billion.
Other Notable Mentions
Rite Aid, a pharmacy chain trucking giant, Yellow Corporation, and Silicon Valley Bank were other notable firms that reported bankruptcy in 2023.
Possible Causes of the Hike in Bankruptcies
Since there is no smoke without fire, something must have triggered the unimaginable rise in business bankruptcies across industries in the United States in 2023.
First, the bankruptcy spike signals a sharp shift in lenders’ attitudes. Many look for ways to dissociate themselves quickly from a struggling firm. They are hesitant to support struggling companies due to the probable outcome.
“If a struggling firm does not get the required financial support at the appropriate time, it will probably go bankrupt. It is like a sick patient not getting a physician’s attention,” says business law attorney Sasha Begum of Begum Pelaez-Prada, PLLC. (Pictured).
Many other challenges contributed to the insolvency. For instance, the government withdrew support from businesses after the pandemic. Many businesses did not know the support would stop abruptly, and many had not put their finances in order when the support stopped.
Inflation also played a crucial role in this problem. Individuals and businesses are often the casualties of inflationary trends. People become poorer as their purchasing power diminishes, while businesses without multiple financial shock absorbers experience downward trends.
Global unrest and disruptions in the supply chain have also caused some businesses to go bankrupt. The ever-increasing tension among nations, subtle regional hostilities, and distrust fuel business disruption. Some organizations have become victims of their resident country’s stance on global issues.
Ultimately, stricter lending policies are further contributing to the storm. Businesses get frustrated and give up when lending seems unattainable. No one wants to use all the resources to pursue a cause without a certainty of achieving it.
Source: Begum Pelaez-Prada LLP, Attorneys, San Antonio Texas.
