Biggest Bankruptcies in History

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on September 08, 2023

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What Are the Biggest Bankruptcies in History?

Lehman Brothers

Lehman Brothers, a global financial services firm, filed for bankruptcy in 2008 with $639 billion in assets and $613 billion in liabilities. This bankruptcy is the largest in U.S. history and was a key event in the subprime mortgage crisis that led to the Great Recession.

The bankruptcy was primarily caused by Lehman Brothers' involvement in the subprime mortgage crisis, where they had significant exposure. When the housing market collapsed, the firm found itself holding a vast amount of worthless assets.

The fall of Lehman Brothers sent shockwaves around the globe. It exacerbated the financial crisis of 2008 and led to the most severe global recession since the Great Depression.

Washington Mutual

Washington Mutual, a savings bank holding company and the former owner of Washington Mutual Bank went into receivership in 2008. With over $307 billion in assets, it was the largest bank failure in American history.

Washington Mutual's failure was largely due to its exposure to subprime mortgages. It experienced significant losses when the value of its mortgage-backed securities plummeted as a result of the housing market crash.

The bank was seized by the Federal Deposit Insurance Corporation (FDIC) and sold to JPMorgan Chase. This event marked a critical point in the financial crisis.


Telecommunications company WorldCom filed for bankruptcy in 2002 after a series of accounting scandals. At the time, with $107 billion in assets, it was the largest bankruptcy in U.S. history.

WorldCom's bankruptcy was primarily caused by fraudulent accounting practices that inflated the company's assets by billions of dollars.

WorldCom's downfall led to stricter regulations in accounting practices. The Sarbanes-Oxley Act, designed to protect investors from fraudulent financial reporting by corporations, was passed in response.

General Motors

General Motors (GM), one of the world's largest automakers, filed for bankruptcy in 2009. At the time, GM had $82 billion in assets and $173 billion in liabilities.

Several factors led to GM's bankruptcy, including high production costs, an overemphasis on SUVs and trucks despite rising fuel costs, and the 2008 financial crisis, which resulted in a massive drop in auto sales.

After restructuring, a leaner, more focused GM emerged from bankruptcy and returned to profitability. The U.S. government supported the process with a massive bailout to protect jobs and the overall economy.

Biggest Bankruptcies in History

Economic and Societal Impact of Major Bankruptcies

Major bankruptcies have had far-reaching impacts on global economies, leading to significant societal and regulatory changes.

They affect financial markets and investor confidence, disrupt supply chains, lead to job losses, and often trigger regulatory changes to prevent similar incidents in the future.

Financial Ramifications on the Global Economy

Bankruptcies of major corporations can have profound effects on global economies. The bankruptcy of Lehman Brothers, for example, triggered a global financial crisis.

Influence on Regulatory Changes

Major bankruptcies often expose regulatory weaknesses and lead to significant changes in laws and regulations. For instance, the Enron and WorldCom scandals led to the enactment of the Sarbanes-Oxley Act to improve corporate governance and accountability.

Effects on Shareholders and Employees

Bankruptcies can lead to significant losses for shareholders and employees. Shareholders may lose most or all of their investments, and employees may lose their jobs, pensions, or both.

Economic and Societal Impact of Major Bankruptcies

Critical Lessons From the Biggest Bankruptcies in History

Significant bankruptcies in history provide crucial lessons about the importance of financial transparency, the consequences of financial mismanagement, and the vital role of risk management and corporate governance.

Role of Risk Management and Corporate Governance

These bankruptcies underscore the importance of sound risk management and robust corporate governance in maintaining financial stability. Companies that ignore these principles are often more prone to failure.

Importance of Financial Transparency

Transparency in financial reporting is critical to maintaining investor trust. Fraudulent practices like those at WorldCom can lead to catastrophic outcomes.

Consequences of Financial Mismanagement

Financial mismanagement can lead to severe consequences, including bankruptcy. This lesson is vividly illustrated by the bankruptcy of GM, which was largely due to financial mismanagement.

Role of Legal and Financial Systems in Bankruptcies

Bankruptcy laws and regulations, the bankruptcy process itself, and the roles of creditors and stakeholders in the process are all essential elements of the bankruptcy system.

Bankruptcy Laws and Regulations

Bankruptcy laws and regulations provide the framework within which bankruptcies are handled. These laws protect the rights of both the debtor and creditors and ensure an orderly process.

Bankruptcy Process

The bankruptcy process is designed to provide a fair mechanism for dealing with insolvent entities. It ensures that assets are distributed to creditors in an orderly and equitable manner.

Role of Creditors and Stakeholders in the Process

Creditors and stakeholders play a crucial role in the bankruptcy process. They are involved in negotiating repayment plans, and their cooperation is crucial for a successful outcome.

Final Thoughts

Throughout history, significant corporate bankruptcies such as Lehman Brothers, Washington Mutual, WorldCom, and General Motors have not only reshaped industries but also triggered major financial and societal shifts.

These financial collapses underscore the crucial importance of financial transparency, risk management, and robust corporate governance.

Fraudulent practices and financial mismanagement can lead to catastrophic outcomes, inflicting substantial losses on shareholders and employees while also impacting global economies.

On the regulatory front, such failures have often exposed systemic weaknesses, catalyzing changes to enhance corporate accountability and governance.

Overall, these episodes serve as stark reminders of the potential repercussions of financial instability, emphasizing the vital role of bankruptcy laws, the insolvency process, and stakeholders in preserving economic order.

Thus, the lessons from these events are pivotal, providing insights to avert future financial calamities.

Biggest Bankruptcies in History FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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