While Chapter 11 filings in 2019 were about half of the peak reached in 2005, there were significant filings by iconic companies. The American Bankruptcy Institute monitors the bankruptcy landscape and lobbies to pass key legislation, like the Small Business Reorganization Act of 2019. Amy Quackenboss and Ed Flynn provide an overview of significant bankruptcy actions in 2019 and look ahead to 2020.
Total filings for 2019 were about 775,000,1 virtually unchanged from the 773,418 cases filed during 2018. Calendar year 2005 was the high-water mark for bankruptcies with 2,078,415 cases filed. This spike preceded the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), followed by a sharp drop in filings in 2006. Since 2010 filings nationwide have dropped by more than one-half.
The total dollar volume of assets, liabilities and professional fees in Chapter 11 cases far exceeds all other chapters of bankruptcy combined, although they account for only about 1% of all bankruptcy cases.
According to New Generation Research, there were 63 filings by publicly traded corporations in 2019, up slightly from the 58 such filings in 2018. Among the largest cases were the filings by Purdue Pharma and Insys Therapeutics (opioid manufacturers), PG&E2 (California utility), the Celadon Group (trucking), Forever 21 (retail) and EP Energy (oil and gas).
Three significant bankruptcy-related bills involving disabled veterans, family farmers and small business Chapter 11 debtors were signed into law on August 23, 2019. In an era where partisan politics are the norm, these bills all enjoyed widespread support from across the political spectrum.
Bankruptcy debtors are not required to disclose whether they are veterans. However, a research scholar at the Stanford Center on Poverty and Inequality found that veterans are over-represented among bankruptcy filers, comprising about 10% of the U.S. population but accounting for about 15% of bankruptcy filings. According to the National Conference of Bankruptcy Judges, the HAVEN Act “will remedy an imbalance in the bankruptcy code that disproportionately steers veterans receiving such benefits into Chapter 13 cases because they often fail the Chapter 7 means test.”
Chapter 12 was added to the Bankruptcy Code by the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986. Since then, more than 30,000 Chapter 12 cases have been filed. About 600 Chapter 12 cases were filed in 2019, an increase of 20% from 2018.
Certain Chapter 11 debtors would be ineligible for treatment as a small business under Subchapter V, including:
- Debtors whose total liabilities exceed $2,725,625
- Debtors whose debt was primarily consumer rather than business in nature
- Debtors whose estate consists of a single property or project (single asset real estate cases)
Retail Bankruptcy
Clergy Abuse Chapter 11 Cases
To date, all but six of the cases have resulted in approved plans of reorganization or dismissal after settlement with the victims. Parties in the cases filed during 2019, and the dioceses New Ulm and Winona/Rochester (both in Minnesota), Santa Fe, NM and San Juan, Puerto Rico are still working toward resolution.
Bankruptcy Cases in the Supreme Court: The Supreme Court is asked to review 7,000 to 8,000 cases each year, but generally only accepts about 80 cases for hearing. During 2019, three bankruptcy cases were decided by the court:
- Mission Product Holdings Inc. v. Tempnology, LLC (17-1657)
- Obduskey v. McCarthy & Holthus LLP, (17-1307)
Additionally, four cases have been granted certiorari for the 2019-20 term:
- City of Chicago, Illinois v. Fulton (19-357)
Issue: Whether courts should determine ownership of a tax refund paid to an affiliated group based on the federal common law or based on the law of the relevant state.
- Ritzen Group Inc. v. Jackson Masonry, LLC (18-938)
