Dissecting the Increase in Chapter 11 Filings

I just finished teaching an intensive one-week course at Cardozo School of Law designed to introduce students broadly to bankruptcy and reorganization. The course covered debt collection, consumer bankruptcy, large public-company reorganization, small business reorganization (including the SBRA), municipal bankruptcy, cannabis and bankruptcy, third-party releases, and even a bit on chapter 15.  A theme throughout the week was changes in filings during the pandemic. To impress upon students that chapter 11 filings indeed are up, but that doesn't mean they are up everywhere across the country, I created this map. It details year-over-year increases or decreases in chapter 11 filings  based on jurisdiction.

I relied on data from the American Bankruptcy Institute / Epiq detailing total chapter 11 filings in 2019 and 2020. The map thus includes non-commercial chapter 11 filings. Historically, based on data from the Administrative Office of the United States Courts, a very small percentage of chapter 11 filings are non-business-debt filings--historically, about 6%. The more important caveat is that the map counts each filing as a case, even if the case is that of a "child" company filing with a "parent." See Slipster Bob Lawless's prior post about how parent/child filings can make it seem like commercial filings are rising much more than they actually are. Regardless, across the country, in 2020, chapter 11 filings generally are down. And where chapter 11 filings have increased, they seemingly have increased a lot.

Comments

[Bob Lawless]

Except that is a pretty big caveat. The "child" cases--corporate subsidiary/affiliate filings--are not small numbers. In my blog post, I pointed out that Le Pain Quotidien accounted for 43% of all the chapter 11 "filings" in May. In the big chapter 11 venues--Manhattan, Delaware, Houston, and Richmond--filings by large corporate filers are almost certainly the reason those places look to have had big increases. Even in smaller jurisdictions that have fewer filings to begin with, one corporate filing could produce a spike. I think it's really difficult to understand what is going with chapter 11 filings without backing out the affiliate filings.

[Pamela Foohey]

I'll give you that it is really big caveat. The map is visually pleasing. But probably not that reliable. And I should amend my final sentence to put the "seemingly" in bold, italics, underlined, larger font.