According to data from the American Bankruptcy Institute, the total number of bankruptcy filings dropped last year by 13 percent over 2012. Overall, there were 1,032,326 bankruptcies filed last year; 1,186,137 were filed the year before. The largest percentage reduction was in the number of Chapter 11 business bankruptcies, which fell by 31 percent. The nationwide bankruptcy rate reached a peak in 2007 but has been dropping off each year since 2010.
While Chapter 11 is not the only chapter of the U.S. Bankruptcy Code available to businesses, it is one that we often hear about in the news because it is commonly used by large corporations -- airlines, for example. Chapter 11 allows businesses dealing with unmanageable debt to reorganize and shed much of that debt through the bankruptcy process.
All types of business bankruptcy declined, with total commercial filings down by 24 percent, according to the nonpartisan research and education group. A total of 44,111 commercial bankruptcies were filed in 2013, down from 57,964 the year before.
Personal bankruptcy filings were down, as well, although not by as large a percentage. Last year, 988,215 people filed for personal bankruptcy, a 12 percent reduction over 2012, when 1,128,173 filed.
The American Bankruptcy Institute also measured bankruptcy filings on a state-by-state, per capita basis, in order to gauge the states in which insolvency was the biggest problem. The state with the most bankruptcies filed overall was Tennessee, with 6.59 filed per 1,000 people. Georgia, Alabama, Utah and Indiana rounded out the top five states. Texas, happily, did not make that list.
Unfortunately, as the group points out, a substantial reduction in the bankruptcy rate isn’t wholly good news. “As fewer consumers and businesses turn to the Bankruptcy Code for a financial fresh start, the court system, which relies on bankruptcy filing fees for funding, is also affected,” said its executive director. “To make sure that justice remains accessible, ABI joined four other national organizations to express strong support for the Federal Judiciary's FY 2014 funding appeal,” he added.
If you are struggling with debt, it’s good to keep in mind that you’re by no means alone. Even with an overall drop in the bankruptcy rate, nearly a million people and some 44,111 businesses sought debt relief through bankruptcy last year.
Source: Source: American Bankruptcy Institute, "Total Bankruptcy Filings Down 13 Percent in Calendar Year 2013, Commercial Filings Down 24 Percent," Jan. 6, 2014