Amid a global credit crunch that has hurt businesses and individuals alike, new data show that U.S. businesses are seeking bankruptcy protection at a faster rate than consumers this year.From January through March, 13,155 businesses filed for bankruptcy, according to Automated Access To Court Electronic Records, a database that tracks the numbers. That’s an increase of nearly 45% from the 9,103 business bankruptcy filings in the first three months of 2007.
That pace exceeds the growth rate of consumer bankruptcy filings, which have climbed to the highest level in more than two years. During the first quarter, consumer bankruptcy filings increased 27% compared with the same period in 2007, data from the National Bankruptcy Research Center show.
“The canary in the mine is consumer bankruptcies,” Jack Williams, a resident scholar at the American Bankruptcy Institute, said in an interview Wednesday. “As they start to increase, that is usually an indication that small-tomedium businesses will follow.”
The slump in U.S. house prices triggered a credit crunch last year and touched off the nation’s biggest financial crisis in decades. By some estimates, two million families are expected to lose their homes in foreclosures over the next year.
“Bankruptcies are rising due to the heavy burden of household debt and growing mortgage problems,” the ABI executive director, Samuel J. Gerdano, said in a press release Wednesday. “We expect this trend to continue through 2008.”
In all, 86,165 individuals filed for bankruptcy protection in March, according to data from the National Bankruptcy Research Center. That’s an increase of more than 10,000 from February. Gerdano said consumer bankruptcy filings this year are likely to exceed 1 million for the first time in three years.
Business bankruptcy filings totaled 4,724 in March, up nearly 40% from the same period in 2007, according to AACER, a database operated by Jupiter eSources. So far this year, 2,025 businesses have filed for Chapter 11. The list includes Quebecor World Inc., one of the country’s biggest commercial printers; and Plastech Engineered Products Inc., an auto-parts company.
Williams said consumers’ troubles have contributed to a “double whammy” for businesses. He cited Federal Reserve data that show that one out of every seven dollars of disposable income Americans earn is used to pay down debt. With so much debt, he said, consumers are spending less. “For many businesses, their customer base is contracting,” he said.
