U.S. corporate bankruptcies have been rising at the fastest pace since the aftermath of the Global Financial Crisis, highlighting fresh strains in the Trump economy and fueling calls for interest rate cuts to ease the burden on debt-laden companies.
Through July, 446 large companies had filed for bankruptcy, the highest year-to-date total since 2010. July alone saw 71 filings, the most in a single month since the pandemic-era crisis of 2020.
The surge has already pushed this year’s bankruptcy tally above the full-year totals of 2021 and 2022, when the economy was still rebounding from pandemic shutdowns, underscoring the growing pressure on corporate balance sheets.
Several well-known companies have sought Chapter 11 protection this year, including Rite Aid, Party City, and Claire’s, while Forever 21 re-entered bankruptcy proceedings. More recently, Del Monte Foods filed amid mounting debt and weakening consumer demand.
Some of these companies — including Forever 21, Party City, and Claire’s — have been backed by private equity, typically through leveraged buyouts that saddle the business with far more debt than it would likely have taken on otherwise.
When interest rates rise or remain elevated, those debt burdens translate into sharply higher servicing costs, leaving the companies especially vulnerable.
“There just aren’t many companies that can withstand interest rates staying this high for this long,” Anthony Arnold, a partner at Barnes & Thornburg, told S&P Global.
“Interest rates are way too high”
The surge in debt-driven bankruptcies has intensified debate over whether the Federal Reserve should have cut interest rates sooner, with some market commentators arguing that President Trump was right to press the central bank to act more quickly.
“Trump is 100% correct on interest rates,” wrote Clay Travis, co-host of The Clay Travis and Buck Sexton Show. “Jerome Powell raised them far too slowly with Biden’s inflation disaster and now he’s lowering them far too late too.”
Even David Malpass, a former World Bank president, voiced the same concern, saying the Fed “has the rates too high.”
The Fed is widely expected to resume rate cuts later this month as labor market conditions weaken, with more reductions anticipated over the rest of the year. Fed Fund futures prices anticipate rate reductions in September, October, and December.
For companies with floating-rate debt — particularly many private equity–backed firms — lower borrowing costs could bring immediate relief, while cheaper refinancing may offer struggling businesses much-needed breathing room.
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