For the fifth consecutive year, Texas has emerged as the undisputed leader in U.S. corporate bankruptcy filings, solidifying its position as a preferred venue for businesses seeking financial restructuring. In 2024, the Lone Star State handled more Chapter 11 filings than any other state, with a total of 1,353 cases, a notable 14% increase from the previous year. This surge places Texas ahead of Delaware, historically a dominant hub for such proceedings, which recorded 1,208 corporate bankruptcies during the same period.
Texas’s Ascendancy in Corporate Restructuring
The trend underscores a significant shift in the landscape of U.S. business bankruptcies. While Delaware has long been recognized for its corporate-friendly laws, Texas courts, particularly in the Southern and Northern Districts, have cultivated a reputation for efficiency, predictability, and experienced jurists specializing in complex restructurings. This has led legal teams and their clients to view Texas as an integrated market where favorable outcomes are anticipated. The state’s bankruptcy courts, especially those in Houston and Dallas-Fort Worth, have become go-to locations for major corporate reorganizations, attracting filings from across the nation.
The Allure of Texas Courts: Expertise and Predictability
Several factors contribute to Texas’s growing appeal. The state’s bankruptcy judges are frequently lauded for their deep understanding of corporate finance and restructuring, fostering an environment where legal professionals can anticipate case progressions and rulings. This predictability is invaluable in high-stakes bankruptcy proceedings, where timing and certainty can significantly impact a company’s survival. Furthermore, Texas is often perceived as a business-friendly state, encouraging corporations burdened by unmanageable liabilities to seek refuge and resolution within its judicial system.
In 2024, the Northern District of Texas, encompassing Dallas and Fort Worth, witnessed a dramatic increase in its corporate Chapter 11 caseload, more than doubling its filings from the prior year. This surge, fueled by financial distress across industries like healthcare, retail, and energy, positioned Dallas-Fort Worth as one of the nation’s most popular restructuring venues. The Eastern District saw an 17% increase in new business bankruptcies, while the Western District experienced a 19% uptick.
Navigating the Fallout: Scandals and Strategic Shifts
However, the Texas bankruptcy scene has not been without its challenges and shifts. The Southern District of Texas in Houston, once the undisputed leader, experienced a significant decline in filings, particularly for large cases, following an ethics scandal involving a prominent judge. Between October 2023 and July 2024, business bankruptcies in Houston with liabilities of $10 million or more dropped by over 70%. This period saw Delaware regain some ground, even surpassing the Southern District in billion-dollar bankruptcies.
Despite the Houston court’s temporary dip, the overall trend still favors Texas. Legal experts note that the Northern District’s strategic revisions to its local rules, aimed at enhancing its business-friendly environment, coupled with the fallout from the Houston scandal, have redirected filings and bolstered its standing.
Broader Economic Currents and Industry Impacts
The rise in business bankruptcies is occurring against a backdrop of persistent inflation, high interest rates, and mounting consumer and corporate debt, factors that continue to exert pressure on businesses nationwide. Industries such as healthcare, retail, energy, and hospitality have been particularly affected, contributing a substantial portion of the filings in Texas.
Looking Ahead
As the economic climate evolves, Texas continues to assert its dominance as a key venue for corporate financial distress and restructuring. The state’s experienced judiciary, established legal processes, and ongoing reputation for efficient case management ensure its prominence in the national business news cycle. While specific districts may see fluctuations, the overarching narrative points to Texas remaining a critical battleground for corporate survival and reorganization for the foreseeable future. Furthermore, legislative efforts, such as those aimed at curbing the controversial “Texas Two-Step” maneuver, highlight the state’s significant role in shaping national bankruptcy law and practice.
