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As 2025 begins, bankruptcy professionals are taking a look at the issues they predict will be most prevalent in the new year. There are mixed opinions on whether filings for bankruptcy will trend up or down, but there is more certainty from professionals that there will not be a final decision on what claims releases can be included in bankruptcy filings.
According to an article from Law360, many bankruptcy professionals could see cases either rising or falling in 2025, with several thinking that the consequences of the COVID-19 pandemic still have an impact on businesses. Many companies took out loans in 2020 and 2021 in an attempt to survive the pandemic. However, the maturity dates on these loans are now looming, and businesses may begin to feel the impact.
There are professionals who think these companies still have time before they have to face any challenges. In the article from Law360, Steve Smith of Herrick Feinstein LLP predicts that bankruptcy filings will continue to surge in 2025, but that the maturity wall for many COVID-19 refinancings will be past 2027, so businesses have time before they have to face any issues.
However, there is more consensus around the idea that sectors dependent on imports, such as technology and the automotive industry, may experience issues if President Donald Trump follows through on promises of new tariffs. As well, most professionals interviewed for the article predicted the real estate, healthcare and retail industries will continue to struggle.
Despite this, there are many professionals who predict filings to decrease in the new year due to lower interest rates and the growth of private credit for businesses. Graff and Sandy Qusba, head of Simpson Thacher’s restructuring practice, shared in the Law360 article that they predict filings will decrease in favor of out-of-court restructuring and refinancing options.
The other issue professionals are watching in the new year is the viability of third-party claims releases in Chapter 11 plans. Following a Supreme Court decision on Purdue Pharma’s Chapter 11 plan, the Court found that bankruptcy plans cannot include involuntary releases of claims against nonbankruptcy parties. However, this did not clarify what a “voluntary” release exactly was.
Since this issue arose, bankruptcy judges have made varying decisions on whether “opt-in” or “opt-out” releases are the acceptable way to gain consent. Professionals predict that companies may try to work around this question.
Some members of Congress are discussing the idea of changing the rules for big lawsuits. They are looking at things such as the “Texas two-step” bankruptcy move that Johnson & Johnson used for its talc problems – some want to ban it altogether. But other experts, like Feldsher and Gallo from Morgan Lewis, think there might be a better way. They suggest using the same rules we have for asbestos cases for all kinds of toxic lawsuits.
