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What Chapter 11 bankruptcy means
Filing for bankruptcy doesn't always mean the end for an American business.
There was a historic surge in U.S. corporate bankruptcy filings in June, with the highest number recorded in a single month since at least the start of 2020, new data shows.
The number of corporate bankruptcy filings as of June 2024 also surpassed half-year figures seen in over a decade, according to S&P Global Market Intelligence, which shares financial and industry data.
S&P Global Market Intelligence said it recorded 75 new corporate bankruptcy filings in June.
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Red Lobster files for Chapter 11 bankruptcy
Axios reporter Richard Collings joins LiveNOW's Andrew Craft to dissect Red Lobster's decision to file for Chapter 11 bankruptcy.
"The pace accelerated from the first months of 2024 and is rivaled by only the busiest months in 2020, when the shock from COVID-19 pushed a relatively higher number of companies into bankruptcy," the company said in a report shared last week.
There have been a total of 346 total bankruptcy filings so far in 2024, which is "also higher than any comparable figure in the prior 13 years."
S&P Global Market Intelligence cited high interest rates, supply chain issues and slowing consumer spending as issues facing struggling companies.
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Consumer discretionary sector leads corporate bankruptcies
The majority of businesses that reported bankruptcy filings in 2024 were part of the consumer discretionary sector, according to S&P Global, with 55 total filings as of July 1, 2024.
Companies in the consumer discretionary sector manufacture goods or provide services that people want – but don't necessarily need, according to TD Bank. This includes restaurants, hotels, clothing retailers, and even media companies.
It’s also not the same as consumer staples, which are items people need all the time – like food and household products.
In June alone, the consumer discretionary sector recorded 16 new filings, S&P Global said. Chicken Soup for the Soul Entertainment Inc., which operates Redbox DVD rental kiosks and the streaming website Crackle, was among the companies last month.
In its bankruptcy filing, Chicken Soup for the Soul disclosed that it owed millions to over 500 creditors, some of which include Sony Pictures, Warner Bros, Walgreens and Walmart.
Other notable consumer discretionary bankruptcy filings reported include Joann, the iconic fabrics and crafts retailer, in March, and Red Lobster in May.
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The healthcare and industrial sectors each recorded the second-highest bankruptcy totals in 2024, with 40 filings each.
A total of seven healthcare companies sought bankruptcy protection throughout the month of June, while nine industrial companies entered bankruptcy proceedings, according to S&P Global Market Intelligence data.
This story was reported from Cincinnati.