Chapter 11 Might Save the Business—But Lose the Customer

When companies file for Chapter 11 bankruptcy, executives often focus on restructuring debt, selling assets, and negotiating in court. Yet, reorganizations often falter not because of courts or creditors, but because customers lose faith in the business.

When consumers are aware of business bankruptcies, their willingness to pay for the firm’s items drops by as much as 28%, with many people expressing concern that product quality might suffer, says research by Harvard Business School Assistant Professor Samuel B. Antill. This lack of consumer confidence can chip away at the overall value of the firm.

“Why would they care if they buy a shirt from a bankrupt firm?” Antill asks. “But it turns out people care a lot about buying a shirt from a bankrupt firm.”

As business bankruptcy filings increase by nearly 15% in 2025 compared to last year, according to the Administrative Office of the US Courts, the results cast new light on the true costs of a Chapter 11 filing.

The findings may spur executives to find alternative ways to rebuild their businesses, says Antill, who cowrote the article, “Consumer Choice and Corporate Bankruptcy,” with Boston College Assistant Professor Megan Hunter. The paper has been accepted for publication in the Journal of Finance.

Are consumers aware of bankruptcies?

Through a questionnaire and experiments, Antill and Hunter sought to test 1,749 participants’ assumptions, misconceptions, and general knowledge of the Chapter 11 process. The researchers referenced companies in Chapter 11 in 2022, the year the study was conducted, across three industries: airlines, car manufacturing, and retail stores.

There’s limited academic research on how consumers respond to Chapter 11, perhaps based on the belief that shoppers are largely unaware of such proceedings. “We were also skeptical and thinking, do people really know about corporate bankruptcies?” says Antill. “And the answer is absolutely yes.”

On average, they found that 38% of study participants knew about major bankruptcies. The awareness level depended on the industry, with consumers most likely to be aware of bankruptcy filings in retail. For example:

• Almost 44% of survey-takers knew about typical large retail bankruptcies.

• As many as 39% of consumers were aware of bankruptcies among major car manufacturers.

• For major airline bankruptcies, consumer awareness reached 35%.

Consumers shy away from bankrupt firms

Antill and Hunter set out to determine how bankruptcy declarations affect consumers’ buying habits. In incentivized experiments that randomly informed consumers about a firm’s Chapter 11 reorganization, the results showed that:

• A consumer’s willingness to pay for the firm’s products decreased by as much as 28%, suggesting that retailers might have to lower their prices to keep shoppers interested.

• The firm’s value dropped by 12-15%.

These reactions could be enough to undermine an already-troubled company’s ability to stay afloat during reorganization—an important variable that any executive should consider before signing off on a Chapter 11, Antill says.