---
title: How to Prepare Your Massachusetts Business for the Rise in Bankruptcy Filings
description: Business bankruptcies are on the rise, but there are several steps you can take to protect your business from trouble.
image: https://liprestilaw.com/hubfs/Bankruptcies%20are%20rising%20Are%20you%20prepared.jpg
---

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 May 30, 2025

# How to Prepare Your Massachusetts Business for the Rise in Bankruptcy Filings

![Picture of Joseph Butler, Esq.](https://liprestilaw.com/hs-fs/hubfs/Joseph-13.jpeg?width=50&name=Joseph-13.jpeg) [Joseph Butler, Esq.](https://liprestilaw.com/the-firm-connection/author/joseph-butler-esq)

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Bankruptcies of big companies, including Party City, Big Lots, [TGI Fridays](https://liprestilaw.com/the-firm-connection/navigating-chapter-11-what-tgi-fridays-bankruptcy-means-for-the-restaurant-industry), and Spirit Airlines, have grabbed headlines in recent months, but recent stats show they aren’t alone. Even more alarming, the trend is on the rise, leaving more companies vulnerable.

Bankruptcy filings rose 13.1 percent during the 12-month period ending in March 31st. New cases remain significantly lower than after the 2007-2008 Great Recession, but ongoing economic volatility leaves business owners across Massachusetts asking: *What’s next, and how do I protect my business?*

Even companies that are financially stable with a strong outlook need to keep a close eye on customers and partners that might hit financial troubles.

## **Bankruptcies Climb Post-COVID**

According to the Administrative Office of the U.S. Courts, bankruptcy filings by businesses and individuals are on the rise:

For the 12 months ending March 31:

- 2025: 23,309 businesses; 529,080 total
- 2024: 20,316 businesses; 467,774 total
- 2023: 14,467 businesses; 403,273 total
- 2022: 13,160 businesses; 395,373 total
- 2021: 19,911 businesses; 473,349 total

This contrasts sharply with the early pandemic years. Between 2019 and 2022, filings dropped across the board due to government stimulus programs, eviction moratoriums, and other forms of relief. Those protections have since expired, and the numbers are starting to reflect the delayed financial fallout. That means it is more important than ever to take steps to mitigate your risks.

## **Why Does an Increase in Bankruptcies Matter Now?**

Bankruptcy filings are widely considered a *trailing indicator* of a recession. That means they typically spike *after* a recession has started, not before. However, the recent filing increases are an indication that businesses are still feeling the effects of past economic disruptions. Even more alarming, we believe that they’re a sign that more economic strain is on the horizon.

Whether the economy is about to enter a recession or is already in one, one thing is clear: Now is the time to review your financial risk exposure and ensure you’re prepared.

## **Steps You Can Take to Protect Your Massachusetts Business**

1. **Monitor Customer Creditworthiness Early and Often**

Before extending payment terms, perform credit checks, especially for new or high-volume consumers. Don’t stop there, however. Continue to monitor the financial health of existing customers. Keep an eye out for red flags such as delayed payments, changes in buying patterns, or negative credit events.

1. **Consider Trade Credit Insurance**

Trade credit insurance, also known as accounts receivable insurance, can help protect your business if a customer fails to pay due to bankruptcy or financial hardship. If you are a Massachusetts-based company working with clients across the region or across the country, this can provide a significant safety net. It’s especially important for industries like construction, manufacturing, and wholesale distribution.

1. **Tighten Credit Terms**

Set clear payment policies and consistently enforce them. Don’t wait for a company to declare bankruptcy. At the first sign of financial distress, consider shortening payment terms, requiring deposits, and limiting credit exposure.

1. **Add Contractual Protections**

Build in protections for your company with any new contract, and consider adding them for existing clients. These may include:

- Early termination clauses if a customer shows signs of insolvency.
- Advance payment requirements for high-risk customers.
- Security interests or liens on assets when appropriate.

These measures can help your company withstand the financial fallout if a customer runs into unexpected trouble.

## **Act Quickly if a Customer Files for Bankruptcy**

If a customer files for bankruptcy, you need to be prepared to protect your financial interests. Steps you can take include:

- Consult with knowledgeable bankruptcy counsel to determine whether you can immediately stop all future shipments or services.
- File a proof of claim with the bankruptcy court to document the debt.
- Explore whether you qualify for “critical vendor” status, which may allow you to continue supplying goods or services and receive priority payments in certain cases.
- [Understand preferences](https://liprestilaw.com/the-firm-connection/understanding-preferences-in-bankruptcy-protecting-your-business-from-clawbacks) in bankruptcies to avoid claw backs.

## **Bottom Line**

You don’t need a crystal ball to take action now. Whether or not we’re headed into a recession, the rising number of bankruptcies should be a wake-up call for Massachusetts businesses. Making a few strategic changes today, such as credit checks, tightening terms, insurance coverage,  and improved contracts, can put your company in a stronger position.

**Need help navigating credit risk or strengthening your contract protections?** [Contact us](https://liprestilaw.com/contact) to learn how we can help you safeguard your business in uncertain times.

[Bankruptcy](https://liprestilaw.com/the-firm-connection/tag/bankruptcy)

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Bankruptcy filings rose 11.9% last year, with business filings increasing 11.4%. That increase...

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