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Business Bankruptcies and Failures Still on the Rise

Posted By admin || 9-Sep-2009

Even if the economy recovers it may take a year or two for the rate of business bankruptcies to slow down.

An article from BusinessWeek says that there are no signs that the high rate of business bankruptcy filings will slow down.  In May alone 7,514 business bankruptcies were filed.  This number is up 40% from just a year ago.  If that sounds like a lot, some of the other numbers can leave you staggering.  Approximately one in every 270 American businesses has gone to bankruptcy court since the beginning of the current recession.  That is more than 100,000 companies.

Many businesses that are filing bankruptcy are taking a similar approach by cutting their losses.  Currently most business bankruptcies are Chapter 7 cases.  Chapter 11 cases only represent about 18% of filings for 2009.  In a Chapter 7 bankruptcy the business is liquidated and it does not restructure.  It fails to exist after all of the dust settles.

This is depressing news for business owners and it is especially bad when coupled with history and predictions that say that the high rate of failures isn't going to slow down anytime soon.  The rate is supposed to remain high for at least a year or more after the recession ends.  History shows that it takes a 2% to 3% rise in the GDP in order for the business bankruptcy rate to slow down to a more normal level.

While GDP growth is a good indicator of when the bankruptcy rate might slow down, it isn't the only factor to consider.  The availability of credit has a huge impact on a company's ability to survive.  If credit isn't available when sales are down, then the business has no way to pay their bills.

It is terrible that so many businesses are failing, but there is good news for people who might be affected by a business bankruptcy in their own personal financial situation.  Bankruptcy remains a great option for individuals to turn their finances around, and the cost of a personal bankruptcy is small compared to a business bankruptcy.  If you see all of the benefits that a bankruptcy can afford you, you will see that it will be well worth the price.  If you find yourself struggling financially, you need to contact a bankruptcy attorney today.  Most people do not realize how quickly and substantially things can turn around for them.  If you would like to learn more, please contact a Dallas-Fort Worth bankruptcy attorney today.

Categories: Bankruptcy
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