Bankruptcy Filings Explode – A Review Of Recent Bankruptcy Filings Across The Nation.

Once again there appears to be significant increase in the filing of bankruptcies across the United States. The American Bankruptcy Institute has recently reviewed commercial Chapter 11 filings across the country and has noted a year over year 40% increase from July of 2023 to July of 2024. In that examination, the year over year July increase went from 364 filings in July of 2023 to 510 Chapter 11 filings in July of 2024. Overall, there has also been an increase in commercial filings of 17% from July of 2023 to July of 2024.

The total US bankruptcy filings year over year from July of 2023 to July of 2024 increased 24%. In July of 2024 there were 44,427 total US bankruptcies filed. In July of 2023 there were 33,723 total bankruptcies filed.

With the recent national conversation on the economy and inflation, it is also apparent that consumers have extended themselves too far on credit cards. Relative to consumer bankruptcies in July of 2023 there were 19,463 individuals who filed for Chapter 7 bankruptcy and there were 14,211 individuals who filed for Chapter 13 personal reorganizations. In July of 2024 there were 25,720 individuals who filed for Chapter 7 bankruptcy and 16,302 who filed for Chapter 13. This is an increase of 32% for Chapter 7 filings year over year and a 15% increase in Chapter 13 filings year over year.

The American bankruptcy institute also indicates that there is a strong and steady rise in bankruptcy filings across the country and they believe that this is caused by increased financial pressures both on individuals and businesses. Reviewing this information is consistent with what I have been seeing at my office. The bankruptcy volume continues to increase steadily and has done so since the summer of 2023. Many bankruptcy experts believe that the steady increase will continue through the remainder of 2024 and accelerate into and continue through 2025.

So, the real question is can American households who have been dealing with inflation, rebound from high debt loads that they have put on credit cards to get by from paycheck to paycheck, without the need to file for bankruptcy protection or debt workout? Since early 2022, inflation has really hit families hard causing many to turn to their credit cards to fund their normal lifestyle including paying for food, gas, clothing, and the increased costs of daily living. The rise in food and housing has hit hourly wage workers with stagnant wages particularly hard. Can those families make it to the point where interest rates begin to drop and credit interest rates drop, as Federal Reserve Chairman, Jerome Powell, indicated may happen as early as September of 2024. Powell also indicated that additional rate drops will occur later in the year and into 2025. Or will those families need to continue to run up their credit cards to get by, which may force them to a debt workout or filing for some form of bankruptcy protection with the United States Bankruptcy Court.

Based on my experience this period looks eerily like the 2008 through 2012 downturn where individual debt loads that consumers carried were up and wages did not keep pace which required many to file for protection with the Bankruptcy Court. Eventually these filings did work through the system and gave those who had filed a new chance to start fresh through the filing of their petitions with the United States Bankruptcy Court.

I would expect that we will see continued filings and the trend will increase throughout the next 12 to 18 months. Hopefully interest rates can be reduced, alleviating some of the strain for some individuals, but in all likelihood, I expect the increase in filings to continue.

If you need help considering your options for debt workout or bankruptcy, please feel free to give me a call for a free one-hour consultation.