Are banks encouraging bankruptcies?

sign-on-stack-of-moneyBusiness Week’s recent article seems to think so. More than 100,000 companies—about one in every 270 American businesses—have landed in bankruptcy court since the downturn began 18 months ago, according to data compiled by Oklahoma City-based Jupiter eSources.

One suggestion is that banks and creditors have little patience during this downturn for turnaround plans. Indeed, the vast majority of business bankruptcies are Chapter 7 liquidations, in which the company ceases operations and its assets are sold to pay off lenders. So far in 2009, just 18% of business filings have been Chapter 11, according to the Jupiter eSources report.

Anecdotal reports I’m receiving suggest that most banks realize that these are tough times for everyone and are more inclined to support realistically achievable turnaround plans. What are you hearing or experiencing. Please join the discussion on LinkedIn by clicking here.

Leave a Reply