Business experts explain the reasons behind the increasing trend of Chapter 11 bankruptcies

Recently, there has been a surge in Chapter 11 bankruptcy filings by several large companies. Among those that have announced Chapter 11 filings are Red Lobster, Express, and Tijuana Flats. These companies are facing financial challenges that have led them to restructure through bankruptcy.

The increase in bankruptcy filings can be attributed to a variety of factors. One major factor is the rise in interest rates. Adam Marshall, an attorney with Lorium Law, pointed out that even though interest rates are still historically low, they have increased recently. This has made the cost of borrowing money more expensive for businesses, impacting their ability to meet their debt obligations.

Business analyst Carl Gould, founder of 7 Stage Advisors, also highlighted the impact of inflation on businesses. As prices rise and operating costs increase, businesses are finding it difficult to cover their debt service. This trend is likely to continue as long as interest rates and inflation remain volatile.

The closures and restructuring of these companies serve as a reminder of the challenges that many businesses are facing in the current economic environment. As businesses struggle to adapt to changing financial conditions, bankruptcy filings are becoming a more common occurrence. The ripple effect of these challenges is being felt across industries, leading to an increase in Chapter 11 filings.