Bankruptcy

Chapter 11s Rise 62% in 2008

By Bob Lawless

Yesterday, I posted about the increase in total bankruptcy petitions. Today, I want to focus on one particular subset of that figure and that is the number of chapter 11 petitions, which also are on the rise. Again, Automated Access to Court Electronic Records (AACER) has provided filing figures through the end of December 2008. According to these data, there were just over 10,000 chapter 11 cases in 2008 as compared to only 6,200 in 2007 for an increase of 61.5%. In 2008, chapter 11 petitions increased faster than the total number of bankruptcy cases, which rose 32%.

The headlines in the business press have recently reported on large bankruptcies like Circuit City and the Tribune Company. The businesses in those cases certainly employ thousands of people, owe investors millions of dollars, and rightfully deserve the attention they garner. These large bankruptcies represent only a tiny fraction, maybe no more than 2% of the chapter 11 cases that were filed in 2008. The typical chapter 11 is a much smaller business or is often the bankruptcy of a small business owner. Indeed, individuals filed 19.5% of all the chapter 11 cases in 2008. Many of these chapter 11s represent the lost dream of a small business owner and the jobs that went with that dream.

Full post as published by Credit Slips on January 06, 2009 (boomark / email).