It was recently reported that commercial bankruptcy filings have increased year-over-year, however, total bankruptcy filings declined for the first 9 months of the year and during September alone. The number of commercial bankruptcy filings for the first 9 months of this year increased 28 percent over filings for the first 9 months of 2015. In total, there were 28,789 commercial bankruptcy filings for the first 9 months of this year and 22,444 for the first 9 months of 2015.
Filings for Chapter 11 commercial bankruptcy increased 5 percent during the first 9 months of 2016 totaling 4,311 filings compared to 4,091 during the first 9 months of 2015. Business bankruptcy filings overall increased 38 percent from 3,072 in September of 2016 compared to 2,219 in September of 2015. Chapter 11 bankruptcy filings increased 8 percent from 337 in September of 2015 to 364 in September of 2016. Leading states with the highest per capita bankruptcy rate for the first 9 months of 2016 include Tennessee with a rate of 5.67 when considering total filings per 1,000 population.
There are two types of business and commercial bankruptcy available to help struggling businesses. Chapter 11 commercial bankruptcy allows a struggling business to reorganize its debt and continue to operate the business to return to profitability. Chapter 7 commercial bankruptcy is another option that allows the struggling business to liquidate assets to repay businesses. It, however, requires the closure of the business. Depending on the position and goals of the business, both options are available to help businesses that have fallen on difficult times.
Because of the important differences between commercial bankruptcy options designed to help struggling businesses, it is important to be familiar with all the options and resources available. It is helpful to understand how to determine which option is best based on the circumstances and goals of the business for its present and future.
Source: ACA International, "Year-over-Year Commercial Bankruptcy Filings Increase," Oct. 6, 2016