The year 2023 has seen a significant uptick in business bankruptcy filings in the United States, a trend mirroring the economic challenges coursing through various sectors. According to data released by the Administrative Office of the U.S. Courts, business bankruptcy filings rose by a staggering 23.3%, from 12,748 in the year ending June 2022 to 15,724 in the same period in 2023.
A deeper dive into the data reveals that the nature of these filings varied. Chapter 7 filings, which typically signal the end of the road for many struggling businesses, increased by 17.17% year-over-year (from 3,640 in 2022 to 4,265 in 2023). On the other hand, Chapter 13 filings, often employed by individuals to restructure their debt but also utilized by small business owners, saw an increase of 8.61% year-over-year (from 3,205 in 2022 to 3,481 in 2023).
The narrative grows grimmer when focusing on the financial sector. Reports from S&P Global on March 23, 2023, underscored a noticeable rise in corporate bankruptcy filings within the financial sector, including realms like healthcare, real estate, banking, fintech, and insurance3. The jump in Chapter 11 filings, which allow companies to reorganize their debt while continuing operations, was particularly pronounced with a 68% increase in the first half of 2023 compared to the same period in 2022.
The scale of bankruptcy filings also saw a shift. The first half of 2023 witnessed an average of 12 large corporate bankruptcy filings per month, nearly doubling the monthly average of 6.4 from 2005 to 2022. However, the average assets at the time of filing among the largest 20 bankruptcies in the first half of 2023 were 41% lower than the corresponding figure in 2022, suggesting that although the number of filings surged, the financial magnitude of the distressed firms was lower.
This unsettling trend of rising business bankruptcy filings has been ongoing for 13 consecutive months as of August 2023, underlining the enduring economic challenges even as the Biden administration grapples with its fiscal policies. The data accentuates the urgency for bolstered financial frameworks and support mechanisms to aid struggling businesses amidst fluctuating economic conditions.
• U.S. Courts: “Bankruptcy Filings Rise 10 Percent” – https://www.uscourts.gov/news/2023/07/31/bankruptcy-filings-rise-10-percent.
• Bankruptcy Watch: “Bankruptcy Data & Statistics (Updated October 10th, 2023)” – https://www.bankruptcywatch.com.
• S&P Global: “Financial bankruptcy filings on the rise in 2023” – https://www.spglobal.com.
• Reuters: “Bankruptcy filings surge in first half of 2023 in US, Epiq says” – https://www.reuters.com.
• Cornerstone: “Large Corporate Bankruptcy Filings Surged in First Half of 2023” – https://www.cornerstone.com.
• Daily Caller: “Bankruptcy Filings Spiked In 2023 Under The Biden Administration, And…” – https://dailycaller.com.