Chapter 11 filings skyrocket in Q3

Chapter 11 filings are up, according to a 3rd Quarter 2020 analysis from Polsinelli.

Polsinelli’s report, called the Polsinelli-TrBK Distress Indices Report, tracks the increase or decrease in all Chapter 11 filings with more than $1 million in assets since the fourth quarter of 2010, according to a Thursday news release. The report provides a broader economic view, tracking both public and private companies.

The report highlights economic distress in the real estate and health care industries and reveals that Chapter 11 filings in Q3 2020 have reached the highest level since 2010.

“We’re starting to really see the impact of the pandemic and resulting shutdown on overall Chapter 11 bankruptcy filings over the last few quarters,” Jeremy Johnson, Polsinelli shareholder and report co-author, said in the release.

“Although it’s difficult for anyone to predict what the economy will do the rest of 2020 and into 2021, we do anticipate filings continuing this momentum as we deal with the fallout from the pandemic,” Johnson said. “We recommend that companies avoid filing unless they have an exit strategy or their hand is forced by a creditor.”

Significant updates noted in the report show that the Chapter 11 Distress Research Index was 81.17 for the third quarter of 2020, a 26-point increase compared to the same time last year.

The Real Estate Index decreased approximately one point since the last quarter and showed an increase of almost four points from last year, while the Health Care Index decreased 42 points since the last quarter.