A bankruptcy spike is on the way

According to Bloomberg Law, bankruptcies for businesses for February and March will be down compared to last year. That doesn’t mean coronavirus hasn’t had an effect yet. Expect a surge to come in a few months. 

  • Businesses are waiting on the stimulus: The $2 trillion deal reached last week by the federal government offers monetary relief and potential loans to businesses. They will likely spend time figuring out if the help is enough to offset their losses or wait to judge customer sentiment when quarantine orders end. 

  • Bankruptcies are expensive, too: The last thing a struggling company needs right now is the $1,000 an hour rate top bankruptcy attorneys charge.

Withholding rent may be the better option

Retailers might be able to bide time for themselves by withholding rent. Mitchel Friedman, senior vice president at RCS Real Estate Advisors, told Bloomberg Law that landlord actions against tenants will be difficult to enforce now, given the number of business tenants struggling and temporary waivers on evictions in many jurisdictions.

The Verdict 

Despite the delays, bankruptcy attorneys are preparing for a rash of bankruptcies -- more than from the 2008 financial crisis. Rachel Strickland, co-chair of the bankruptcy practice at Willkie Farr & Gallagher LLP told Bloomberg Law, “Any company that was already on the edge is now at the tipping point.”