There have been more than 120 companies that declared bankruptcy in 2020 and blame COVID-19 for their downfall. Although many of these businesses were in financial trouble prior to the pandemic, the loss in revenue made those issues more evident. With many other companies holding billions of dollars in debt, it is likely we will see even more COVID-19 bankruptcies before the end of the year.
Which Companies Are Filing?
Some pretty big names are already among those filing for bankruptcy and closing doors. Here are some of the most recognizable names on the list.
- 24 Hour Fitness
- Brooks Brothers
- Chesapeake Energy
- Frontier Communications
- Gold’s Gym
- J Crew
- J.C. Penny
- Latam Airlines
- Neiman Marcus
- New York & Co.
- Sur La Table
- True Religion Apparel
More than 100 other businesses have filed or announced they will be filing for bankruptcy due to COVID-19. This includes American Addiction Centers, a Tennesse-based addiction recovery organization, who started suffering financially when patients simply weren’t coming in after the pandemic. Even the Catholic Church for the Archdiocese of New Orleans filed for bankruptcy due to a lack of collections as many mass gatherings have been canceled.
How COVID-19 Bankruptcies Will Impact The Economy
Over 6,800 businesses filed for bankruptcy in the U.S. last year. This year will undoubtedly have many more. Companies that have filed, or plan to file, are huge players in the American economy. Some, like Hertz, even have billions in assets to sell-off. Others simply saw no way to continue in the COVID-19 social distancing era.
“We’ve survived through wars, recessions, terrorist attacks, political upheaval, hurricanes, tornadoes, blizzards and more,” Sugarloaf Craft Festivals wrote on its website. “With no cash flow coming in, even a well-managed company cannot survive indefinitely.”
The good news is many medium-to-large size companies declaring bankruptcy will likely be able to work out a payment plan to manage their debts moving forward. If they cannot, then the company is liquidated and the assets are sold to pay off those debts. Small businesses may never recover though.
“We anticipate that a significant fraction of viable small businesses will be forced to liquidate, causing high and irreversible economic losses,” a group of academics wrote to Congress. “Workers will lose jobs even in otherwise viable businesses.”
In many cases, however, COVID-19 bankruptcies are revealing already troubled business models and staggering debt. Many of these companies were struggling before disaster struck. Hertz, for instance, has debt accrued from over 10 years ago.
So, it is safe to say that, in many cases, a complete business reform will be the only thing to prevent this from happening again. It is also easy to assume there are still many other businesses who will file before the year is out. The overall economic impact is likely to be seen for decades to come.