Written by Craig D. Robins, Esq.
Yesterday’s Businessweek Magazine  contained an insightful article, “Bankruptcies: The Next Wave.”
The author analyzed the current economy and stated that even though credit markets have improved somewhat as of late, and the American economy may be on the road to recovery, that won’t prevent a new run of corporate bankruptcies in the next year.
Here’s why: too many companies loaded up with too much debt to survive the next year without defaulting on their debt obligations. As such, they will need to file for bankruptcy protection under Chapter 11.
There is still too much debt on the balance sheets of corporate America. Banks gave many loans in 2007 when the economy was still strong. However, these loans are now coming due at a time when the economy is still weak and access to additional credit is very tight.
The recent improvement in the stock market may make credit more available. However, banks will only make credit available to financially healthy companies, and not those who may need it the most.
The article concluded by saying: “The irony is that a record number of troubled firms could tumble into bankruptcy next year, at the same time that the economy and credit markets start showing major signs of improvement.”
Unfortunately, the wave of Chapter 11 bankruptcy filings will certainly hit Long Island, as it is home to a number of struggling companies, including retail and restaurants.