Economists believe that even a rapid economic recovery won't save a large number of businesses that have suffered too much damage during the pandemic, which means that bankruptcy courts may soon see themselves stretched to the limit as case loads explode, said the New York Times. That we have not seen such a wave so far has been attributed to the numerous aid programs enacted by the federal government over the past few months; when these programs run out, however, experts believe that many firms will find themselves driven off the "corona cliff" and be forced to go into bankruptcy. Edward Altman, who invented the "Z Score," which calculates the odds a company will go under has estimated that when this happens, the country will reach record-setting numbers of mega-bankruptcies involving more than $1 billion in debt, and he further believes that the number of cases involving at least $100 million will at least meet the records set during the 2008 crisis.

Consequently, some have raised concerns that the courts may not be able to handle the increased number of cases. A letter in May from a group of finance and business academics to the majority and minority leaders of the House and Senate warned that Congress should "add capacity to the bankruptcy system to prepare for what we fear could be a flood of large corporate bankruptcies arising out of this pandemic." Specifically, the academics recommended that "Congress ... appoint additional temporary bankruptcy judges and ... increase the budgets of our existing bankruptcy courts so they can bolster their ranks with retired judges, additional clerks, and other necessary personnel that enhance the capacity of the bankruptcy system."

A Moody's report from late May said that many ailing companies are opting for distressed debt exchanges in lieu of bankruptcy because they offer more control over the process and better rates. However, it also predicted that many of these distressed companies are entering into these exchanges not to head off bankruptcy altogether but simply to forestall the process until capital conditions improve, as analysts project many of these firms that wind up defaulting on their obligations will wind up defaulting again shortly after.

"We expect the next default cycle will produce a spate of re-defaults. Lower-rated companies with weak liquidity and fragile balance sheets, especially those that previously defaulted in one way or another, are at risk of doing so again now that credit conditions are weaker," said the Moody's report, adding that "typically, when the default rate is rising, re-defaults rise proportionately and re-defaults were already increasing before the coronavirus outbreak. The overall re-default rate of US non-financial corporations between 1987 and Q1 2020 stood at 28 percent."