The National Observer: Bankruptcies have risen, especially for small businesses

Bankruptcy filings — whether for businesses or individuals — have surged this year, reports A.J. O'Leary of the Birmingham Business Journal.

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Chapter 11 bankruptcies — when companies can restructure without dissolving the business — were up 67% in February compared to the prior year, landing at 814 for the month, according to the American Bankruptcy Institute. Small businesses have been hit especially hard, with Subchapter V (a streamlined, less expensive subset of Chapter 11 meant for small businesses) filings climbing 91% during the same period.

Bankruptcies for individuals were up 13% to 43,225 for the period, according to the ABI report.

There are a number of reasons for the increase, said Scott Williams, a partner with Rumberger Kirk & Caldwell PA in Birmingham.

"An important reason is the impact of tariffs and high fuel costs on consumer sentiment," he said. "In times of uncertainty, people are cautious about how they spend their paychecks, and the American economy is largely driven by consumer spending. As a result, a slowdown in spending leads to economic contraction. Also, higher interest rates have a negative impact on both individual and corporate spending."

Businesses need to make changes to their operations if they see indications the status quo might no longer be working for them, Williams said.

"Companies who ignore warning signs and simply keep doing 'the same old thing' will often find themselves headed down a dead-end road," he said.

Trend marks a continuation from last year

Bankruptcies in 2025 were already elevated, said Timothy Palmer, shareholder and bankruptcy practice group leader at Buchanan Ingersoll & Rooney PC, speaking to Patty Tascarella of the Pittsburgh Business Times earlier this year. That trend was driven by macroeconomic factors such as high borrowing costs, persistent inflation and the impact of trade policies and tariffs, he said.

Michael Shiner, a shareholder at Tucker Arensberg and chair of the law firm's bankruptcy and restructuring department, told Tascarella filings by small businesses were part of that surge last year.

"We're seeing real stress with smaller companies and companies in the lower middle market — under $20 million in revenue," he said. "They're facing the economic pressures we're all seeing across the boards. Inflation has slowed, but prices haven't gone down. They've stopped growing as quickly but everything costs more than it did five years ago. The labor market is still tight and a lot of small businesses are having trouble getting as many employees as they'd like."

It's worth noting, of course, that these larger trends can vary by region. In Pittsburgh specifically, for instance, bankruptcies ended 2025 at a small decline compared to 2024.

As the war with Iran continues, some defense tech firms that work with the federal government are riding a wave of interest in certain technologies, while others are being left behind, reports Nate Doughty of the Washington Business Journal.

"The demand of nonkinetic capabilities is drastically increased," said Young Bang, president of Two Six Technologies, an Arlington County, Virginia-based telecommunications and cybersecurity firm backed by the Carlyle Group. Nonkinetic capabilities are defensive and offensive technology products the Pentagon is seeking that aren't related to munitions.

Similarly, Matt Jones, CEO of Virginia-based Sigma Defense, said the conflict is putting pressure on the company's digital infrastructure that transmits information from the battlefield to senior military officials. While he hasn't seen an increase in demand, Jones said there's a sense of urgency from the Pentagon to move the company's production and product enhancement to faster timelines.

"When you're working against some undefined conflict, there's one speed, and there's another speed when there's an ongoing conflict," he said. "You just naturally move faster."

The short end of the stick

Maryland-based Avening Management and Technical Services LLC CEO Lee Platt sees the market differently. While she said she hasn't seen a decrease in demand, she expects the Pentagon to start pulling back on some spending to make room for conflict-related costs. Avening provides information technology services that don't have a direct relevance to the war.

Platt said contracts likely to be the most vulnerable are ones that can be trimmed quickly without touching direct war needs — particularly labor-heavy support work.

Big picture

Defense startups enjoyed a surge of eight‑figure funding rounds under the Trump administration last year, Doughty reported previously. And the Trump administration is still spending record sums on defense: The Pentagon's budget is nearly $1 trillion this fiscal year, and the administration is requesting $1.5 trillion for fiscal 2027.

Investors are meeting that demand with fresh capital. Doughty reports that Bethesda, Maryland-based Lockheed Martin Corp. beefed up its venture capital arm with another $600 million to rapidly accelerate its investments in defense technology startups.

Elsewhere in the D.C. area, Capitol Meridian Partners — a private equity firm founded by Carlyle Group alumni five years ago — is raising a second fund to invest in defense, aerospace and government services firms. An investor in the fund told WBJ's Ana Lucía Murillo that demand so far indicates this fund will be larger than the last, which closed at $900 million in 2024.

News broke last week that United Airlines Holdings Inc. CEO Scott Kirby had floated the idea of a merger with American Airlines Group Inc. to the Trump administration.

The news prompted a lot of chatter over whether regulators would permit such a deal and what it would mean for the airline industry.

Fort Worth, Texas-based American, however, put out a statement indicating it is not engaged in merger talks with United and isn't interested in such a deal.

The airline said changes in the broader airline industry "may be necessary." However, such a tie-up with United would be negative for competition and for consumers, American said in its statement and "therefore inconsistent with our understanding of the administration's philosophy toward the industry and principles of antitrust law

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