The Truth Behind U.S. Corporate Bankruptcy Filings and How to Cope What You Need to Know

The Reality and Strategies Behind Corporate Bankruptcy in the U.S.-How Much Do You Really Know?

In recent years, as the global economic landscape continues to shift, corporate bankruptcies in the United States have become increasingly common. Particularly in the post-pandemic era, factors such as supply chain disruptions, rising interest rates, and fluctuating consumer demand have placed unprecedented pressure on business operations. According to data from the Administrative Office of the U.S. Courts, more than 300 large companies filed for bankruptcy in the first half of 2025-an increase of approximately 15% compared to the same period in 2025.

Behind these numbers lies an undeniable reality of the U.S. business environment bankruptcy is not a rare occurrence, but rather a common and strategic business tool. The U.S. bankruptcy system is relatively mature, primarily governed by the United States Bankruptcy Code. The two most common forms of bankruptcy are Chapter 7 liquidation and Chapter 11 reorganization. Chapter 7 applies when a company is completely unable to continue operations, and its assets are sold off to repay debts. In contrast, Chapter 11 allows a company to continue operating while restructuring its debts, with the goal of restoring profitability.

In practice, filing for bankruptcy does not always signal the end of a business. On the contrary, many companies use it as a strategic means to shed heavy debt burdens, streamline operations, or gain a reprieve in a competitive market. For example, in March 2025, the well-known retail chain Bed Bath Beyond once again filed for Chapter 11 bankruptcy protection. The company stated that it aimed to close underperforming stores, reduce debt, and restructure its product offerings to operate more efficiently. Another notable case is United Airlines, which filed for Chapter 11 protection in 2002. Through the bankruptcy process, the airline successfully reduced billions in debt, cut costs through layoffs and revised labor contracts, and eventually emerged profitable again by 2006. These examples illustrate that bankruptcy is not necessarily the end for a company-it can be a fresh start.

Of course, bankruptcy is not without consequences. Once a company enters the bankruptcy process, it often faces a downgrade in credit ratings, higher financing costs, and declining employee morale. The process itself is also complex, involving extensive legal and financial procedures. Companies typically need to hire professional legal and financial advisory teams, which can be a significant expense-particularly for small and medium-sized businesses.

From a strategic perspective, when facing financial distress, companies should first conduct an internal assessment to identify the root of the problem. They must determine whether bankruptcy is truly necessary or whether alternative solutions such as debt restructuring or bringing in strategic investors could help them recover. Second, companies should communicate early with creditors to seek consensus and avoid being forced into liquidation. Third, if bankruptcy is indeed required, the company should choose the appropriate chapter and develop a clear plan for reorganization or liquidation to ensure a smooth process.

During the bankruptcy process, management must also maintain transparency and communication-especially with employees and customers. For instance, in early 2025, after filing for bankruptcy, the U.S. apparel brand J.Crew issued public statements promising to fulfill existing customer orders and protect employees' basic rights. Such actions helped maintain the brand's reputation and laid the groundwork for future recovery.

It's also worth noting that the U.S. government plays an important role during corporate bankruptcies. For example, the federal government can provide loan support through the Small Business Administration SBA to help certain businesses weather difficult periods. States may also introduce temporary policies to reduce the risk of bankruptcy caused by unexpected events such as natural disasters or economic downturns.

For investors and creditors, understanding the bankruptcy process and the legal protections available is crucial. In Chapter 11 proceedings, creditors are typically divided into different classes, with secured creditors-those holding collateral-receiving priority in repayment. In Chapter 7 liquidation, unsecured creditors may recover only a portion of their investment, or none at all.

Behind the phenomenon of corporate bankruptcies in the U.S., there are both objective market fluctuations and subjective internal management issues. Facing difficulties, filing for bankruptcy does not equate to failure-it is a way for companies to restructure and restart. The key lies in how effectively companies can utilize the legal framework provided by the bankruptcy system to develop practical strategies and find new opportunities amid adversity.

In the business world, change is constant, and challenges are inevitable. Understanding the true nature of bankruptcy and mastering the appropriate response strategies not only helps companies mitigate risks but also provides investors and creditors with valuable decision-making insights. For anyone interested in business trends, this is a subject well worth deeper exploration.