2024 Year End Review

The economic landscape in 2024 has been shaped by inflationary pressures, rising interest rates, and ongoing concerns about a potential recession. These factors have led to an uptick in bankruptcy filings, particularly among small businesses and consumers struggling with mounting debt. The Federal Reserve’s efforts to curb inflation have resulted in tighter credit conditions, making it harder for individuals and businesses to refinance or restructure debt. As a result, Chapter 11 filings for businesses and Chapter 13 bankruptcies for individuals have seen a notable increase compared to previous years.

One major legal development impacting bankruptcy law is the increasing scrutiny of nonconsensual third-party releases in corporate bankruptcies. Courts have been reexamining whether companies can shield insiders from liability through bankruptcy proceedings, particularly in cases involving mass torts. The U.S. Supreme Court’s pending decision in Harrington v. Purdue Pharma could set a precedent on whether these releases remain a viable tool in complex restructurings. If the Court limits their use, it could lead to more litigation outside bankruptcy courts and complicate large-scale settlements.

Additionally, there is a growing push for consumer bankruptcy reform. Some policymakers have advocated for making it easier for student loan borrowers to discharge their debt in bankruptcy, a historically difficult feat due to strict undue hardship standards. While the Biden administration has introduced new guidelines to ease this process, legislative efforts to overhaul student loan dischargeability remain stalled. However, if economic conditions worsen, there may be renewed momentum to expand bankruptcy protections for struggling borrowers.

Looking ahead, experts predict a continued rise in bankruptcy filings, especially among smaller businesses with heavy debt burdens and limited access to capital. Sectors like commercial real estate, retail, and hospitality remain particularly vulnerable due to changing consumer behaviors and high interest rates. Additionally, artificial intelligence and automation may disrupt job markets, potentially leading to more individual bankruptcies as workers in certain industries face job displacement.

Ultimately, bankruptcy law will continue evolving in response to economic pressures and legal challenges. Whether through judicial rulings or legislative reforms, 2024 and beyond may bring significant changes to how businesses and individuals navigate financial distress. For attorneys and financial professionals, staying informed about these trends will be crucial in helping clients adapt to the shifting legal and economic environment.