Retailers everywhere appear to be filing chapter 22 — even chapter 33 — bankruptcies. This results in multiple litigation questions, the most recent of which pertain to Rite Aid.

Rite Aid filed for bankruptcy on Oct. 15, 2023, in the U.S. Bankruptcy Court for the District of New Jersey (the “First Rite Aid Case”). The first plan was confirmed on Aug. 16, 2024, and was substantially consummated two weeks later. In the course of and after the First Rite Aid Case, several parties appealed various orders of the court. However, less than 10 months later, Rite Aid filed a second chapter 11 petition in the same court (the “Second Rite Aid Case”). On May 5, 2025, less than two weeks after filing the Second Rite Aid Case, Rite Aid filed a motion to clarify that the automatic stay applies to the appeals, or alternatively, to stay the appeals pending the resolution of the Second Rite Aid Case. After multiple objections from various parties, the Court ultimately found that the automatic stay applied to the appeals.

With the court’s ruling, seven appeals related to the First Rite Aid Case have been stayed, and the Second Rite Aid Case theoretically will continue as a typical case. As a result of this, Rite Aid, as of the writing of this article, has filed notices of the closing of more than 1,000[1] stores, with plans to close all Rite Aid stores throughout the U.S.

The closing of these stores, many of which include pharmacies, brings about a social cost that is not immediately obvious. In corporate bankruptcies, evident losses include jobs, financial recovery and lower recovery from previous harm. But along with those, the Rite Aid bankruptcies present a particular social cost: pharmacy deserts.

Pharmacy deserts are similar to food deserts in that communities do not contain sufficient access to necessary resources. At least one study has found that 95% of the areas experiencing a pharmacy desert do not have even a single pharmacy.[2] This study further found that the pharmacies serving areas considered to be pharmacy deserts are usually independently owned.[3] Pharmacy closings are likely being exacerbated by online pharmacies and their growing access to medications.

There are, of course, myriad solutions outside of the scope of this discussion, but how can pharmacy deserts be addressed in the bankruptcy system? Rite Aid proves to be a notable example on a grand scale, demonstrating overwhelming liabilities that cannot be controlled. How can bankruptcy be used on a macro scale to mitigate pharmacy deserts (and likely food deserts as well)? Although the sunset of the raised subchapter V debt limit is old news, the expansion of this limit would likely play a substantial role in independent pharmacies’ success if they enter into bankruptcy. Subchapter V gives small businesses a generally successful avenue to deal with their liabilities and continue operations. This is not an issue that can be fully resolved or even mostly resolved in the bankruptcy system, as there are political, geographical, and economic factors that are at play just like any other business bankruptcy.

As bankruptcy practitioners on any side know, cases like the Rite Aid bankruptcies have ripple effects that are more than just financial. Cases like Rite Aid, as is being seen currently, affect communities and cities as pharmacies, all-purpose stores and the like are shuttered — leaving people potentially without access to essential medications. Recognizing the effects of cases like Rite Aid informs decisions, negotiations and understanding as communities are facing upheaval. 

The social costs of a bankruptcy, like the Rite Aid cases, might not outweigh the business decisions to file and the closing of stores, but it could impact decisions to purchase leases, to purchase going-concern businesses, or other decisions. Local communities are more than contracts and are affected significantly by cases like the Rite Aid bankruptcies. Recognizing the dynamics at play regarding the social costs can change the course of a decision within a case, which can have major effects throughout entire communities.