RESOLUTION BAZAAR

Definition and Function - The bankruptcy claims market is a secondary market where creditors of bankrupt entities sell their financial claims (rights to payment) to third-party buyers, often at a discount. These claims typically arise when companies file for bankruptcy and owe money to suppliers, vendors, or other business partners[2][5][7]. - The market allows creditors to quickly monetize their claims rather than waiting for the lengthy and uncertain bankruptcy process to conclude, while buyers seek to profit by purchasing claims at a discount and collecting distributions from the bankruptcy estate[5][7].

Market Size and Growth - The bankruptcy trade claim market is currently valued at approximately $9.18 billion and is projected to reach $32.4 billion by 2030, growing at a compound annual growth rate (CAGR) of 22.61%[2]. - In large bankruptcy cases, the volume of claims traded can be extremely high. For example, trading in Chapter 11 bonds alone has exceeded $280 billion in market value over a decade[9].

Key Participants - The market has evolved from being dominated by individual trade creditors to attracting institutional investors such as hedge funds, private equity firms, and investment banks, who seek high-risk, high-reward opportunities in distressed assets[1][4][6][7]. - Online platforms have made the market more accessible and transparent, further increasing participation and liquidity[2].

Market Dynamics and Trends - Economic downturns, industry-specific crises, and ongoing corporate restructurings drive increased bankruptcy filings and claim volumes[2][5]. - The market is characterized by significant variation in timing, asset class, and trading motivation, making it complex and dynamic[1][4]. - Claims are most heavily traded at the beginning of the bankruptcy process, with activity declining as cases progress toward resolution[9].

Opportunities and Risks - Opportunities:

1. Immediate liquidity for creditors.
2. Potential for substantial returns for buyers if recoveries exceed expectations.
3. Portfolio diversification for investors[2][5][7].

- Risks:

1. Difficulty in accurately valuing claims due to uncertain recovery rates.
2. Limited liquidity and information asymmetry in some segments.
3. Regulatory changes and inherent volatility in distressed asset investing[2][6][7].

Criticisms and Challenges - Claims trading can complicate bankruptcy proceedings by introducing new, sometimes short-term-focused, stakeholders whose interests may not align with long-term restructuring goals[1][4]. - Risks include greenmail, insider trading, and reduced willingness of creditors to participate in committees, potentially undermining the collective negotiation process[4][6].

The bankruptcy claims market has become a major, market-driven segment of the financial world, offering both liquidity for creditors and investment opportunities for sophisticated buyers. It is rapidly growing, increasingly institutionalized, and technologically enabled, but also complex and risky, with significant implications for bankruptcy outcomes and creditor dynamics[1][2][4][7][9].

Citations: [1] https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1181&context=facpub [2] https://www.einpresswire.com/article/728649664/bankruptcy-trade-claim-market-will-hit-big-revenues-in-future-prime-clerk-epiq-clayton [3] https://intellizence.com/insights/bankruptcy/leading-companies-filing-for-bankruptcy/ [4] https://brooklynworks.brooklaw.edu/cgi/viewcontent.cgi?article=1123&context=bjcfcl [5] https://www.lowenstein.com/media/6418/nathanpluscargill-a-primer-on-selling-bankruptcy-trade-claims-business-credit-22021.pdf [6] https://www.srz.com/a/web/65946/Gelber-Karp-Schwartz-Feb-2011-Bloomberg-Claims-Traders-Beware.pd.pdf [7] https://www.abc-amega.com/articles/selling-bankruptcy-claims-opportunities-and-risks/ [8] https://repository.uclawsf.edu/cgi/viewcontent.cgi?article=2713&context=faculty_scholarship [9] https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/09/bankruptcy-claims-trading [10] https://www.allianz-trade.com/en_BE/news/latest-news/bankruptcies-forecast-october-2024.html [11] https://www.hbs.edu/ris/download.aspx?name=IIS_Draft_20150313.pdf [12] https://www.uscourts.gov/data-news/judiciary-news/2025/05/01/bankruptcies-rise-131-percent-over-previous-year [13] https://www.arbuthnotlatham.co.uk/insights/perspectives-2025-emerging-trends-in-the-insolvency-protection-sector [14] https://www.wallstreetprep.com/knowledge/creditor-claims-trading-bankruptcies/ [15] http://www.igidr.ac.in/pdf/publication/WP-2023-001.pdf [16] https://www.lowenstein.com/news-insights/publications/articles/a-primer-on-selling-bankruptcy-trade-claims-nathan-cargill [17] https://www.reedsmith.com/-/media/files/perspectives/2019/2018yearinreviewbankruptcyclaimtrading.pdf?rev=396d16b0158c428da7500dcd1a9ca339&hash=9CC7ABA55A6CC9136CB58AB69DA97BB3 [18] https://www.weltman.com/publication-bankruptcy-filings-surge-a-23-percent-increase-in-2025-amid-economic-pressures [19] https://www.dailydac.com/navigating-bankruptcy-claims-trading/ [20] https://www.bankruptcywatch.com/blog/q1-report [21] https://www.azbpartners.com/bank/debt-finance-2025-trends-developments/ [22] https://blogs.worldbank.org/en/allaboutfinance/the-challenges-of-bankruptcy-reform