A spate of high-profile Chapter 22 bankruptcies is raising eyebrows in the world of US restructuring as retailers and other consumer-facing businesses buckle under competitive pressure and operational missteps.

Late Friday, Spirit Aviation Holdings became the latest company to boomerang back into court within two years of emergence, the fourth such case this year, according to Debtwire data. There was one such Chapter 22 case in 2024 and five in all of 2023.

“It’s just not normal” for companies to file for bankruptcy within a year of completing an in-court restructuring, said a restructuring attorney.

Repeat filers raise questions about the quality of the data used to support the business plan a debtor presents to make the case for exiting bankruptcy, the ultimate motivation of creditors who supported the original plan and the bankruptcy process itself, said three restructuring attorneys.

Attorneys attribute the repeat filings in part to the push to reduce the length of time companies spend under the protection of a bankruptcy court. The average duration of completed cases filed last year was 209 days, down from 286 days for cases filed in 2020, according to Debtwire data.

With shorter stays in bankruptcy, companies do not have enough time to reorganize operations or find a buyer, leaving companies to prioritize shedding debt and handing control to creditors, the second restructuring attorney said.

“Bankruptcy should be used as a last resort to cut costs, reduce debt, including lease obligations, and realign operations so that a solid go-forward plan is created to increase the topline business,” said a fourth restructuring attorney.

In some cases, attorneys said management teams need to take a hard look at their firms and decide if a liquidation is a better option than a reorganization that will likely leave them back in bankruptcy court. Retailers, especially, must evaluate whether they have operational problems that can be fixed or if their concept is no longer on trend and should be shut down.

When Spirit Airlines filed for bankruptcy the first time in 2024, the low-cost airline rejected a last-minute bid from a rival airline and prioritized quickly revamping its capital structure over making major changes to its operations or securing concessions from employees and trade creditors.

Spirit projected in December that it would generate profits, but instead has reported rising losses amid overcapacity in the US airline market and reduced consumer demand. On the first day hearing Tuesday for Spirit’s second bankruptcy case, debtor’s counsel Marshall Huebner of Davis Polk said it was the company’s first “true” proceeding, given the speed of the prior case, Debtwire reported.

This time around, Spirit Aviation, the new holding company for Spirit, hopes to redesign its route network and significantly shrink its fleet to better match demand, along with reducing debt, lease obligations and overall cost structure, according to court documents.

“Had it used all the tools available to it in the prior bankruptcy, then it wouldn’t be in its current predicament,” said the first restructuring attorney.

JOANN took a similar approach to its first bankruptcy case, filing a prepackaged plan in early 2024 that significantly reduced funded debt at the arts and crafts retailer without making major changes to operations or asking trade creditors to take a haircut. Management instead decided to pursue a plan to cut costs after emerging and assumed vendors would continue to support the business since they didn’t take a loss in the first case.

Suppliers, though, decided to pull back production, leaving stores with low inventory and materially less sales. JOANN scrambled to fix its supply chain but ran out of liquidity by the time it had solved the problem, forcing it to file a second time only months after emerging, according to a first-day declaration filed in the case.

Not all Chapter 22 filers skirted making hard decisions in their first case.

Rite Aid checked all the restructuring boxes during its 2023 bankruptcy, cutting its USD 4bn debt stack, addressing multi-billion-dollar opioid litigation and reducing its retail store portfolio by the time it emerged in 2024.

The pharmacy chain found itself back in court six months later due to lower-than-expected liquidity from creditors, inventory challenges related to restricted vendor payments, lower consumer spending and competitive pressures, according to the first day declaration filed with the court.

Rite Aid said in a court filing that its post-emergence business plan was based on projections and discussions with vendors that its non-pharmacy vendors would resume prepetition payment terms and support from capital providers for letters of credit facilities under its ABL facility. Instead, the company’s largest vendor imposed cash-on-delivery payment terms and letters of credit were lower than expected, leading to a liquidity squeeze and a second filing in 2025.

The prognosis for companies filing Chapter 22 is not great. Out of the 12 completed Chapter 22 cases with at least USD 25m in liabilities tracked by Debtwire since 2020, seven have ended in liquidation, four emerged as going concerns and one case was dismissed.

JOANN is among the firms that ended up in liquidation, along with specialty retailer Party City, which filed a second time in 2024. In Rite Aid’s still pending case, the company has announced the closure of most of its stores but is proposing to keep a small pharmacy business operating under a restructuring plan that will see no recoveries for general unsecured creditors.

Spirit has so far indicated in the early days of its case that it plans to keep flying with a reduced fleet, though some market participants expect the airline’s assets to be sold off in piecemeal sales.