Almost 1.1 million Americans filed for bankruptcy in 2008, a 32 percent increase from the prior year, as the first recession in seven years forced more companies and individuals to seek protection from creditors.
Total filings for companies rose 50 percent to 64,318, while individual filings rose to 1.03 million, according to data compiled by Automated Access to Court Electronic Records, a service of Jupiter ESources LLC in Oklahoma City. It was the biggest annual total since 2005 when Congress changed laws to make it more difficult for consumers to erase debt in bankruptcy.
Both companies and individuals stepped up the pace of filings last year as foreclosures and firings surged and the economy entered its first recession since 2001. President-elect Barack Obama has pledged an unprecedented fiscal stimulus package to jump-start the economy.
"It's no surprise that bankruptcy rates are well up, given that economic conditions, both at the corporate and household level, deteriorated significantly last year,'' said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. ``I expect to see an ongoing surge in 2009."
Last year, 10,084 companies filed to reorganize or liquidate in Chapter 11, a 62 percent increase from 2007 and more than double those filing in 2006.
Records Set
Filings set records last year as the credit markets locked up. On Sept. 15, Lehman Brothers Holdings Inc. became the largest Chapter 11 filing of all time. Eleven days later, Washington Mutual Inc. sought refuge in Chapter 11, immediately after its savings-and-loan unit became the biggest bank failure in U.S. history.
The world's largest auto-parts maker, Delphi Corp., was unable to implement a reorganization plan creditors voted to accept and the bankruptcy court confirmed, all because lenders wouldn't provide the billions in financing Delphi needed to emerge from Chapter 11.
The biggest increases occurred in California and Arizona, where total filings rose 85 percent and 81 percent, respectively. The states are among those with the highest foreclosure rates.
'The decline in activity in the residential and commercial construction industry" is behind much of the surge in filings, said Jacqueline M. Barry, chief financial officer of Interlake Material Handling Inc., a steel rack manufacturer based in Naperville, Illinois, that filed for Chapter 11 today.
The 2008 total still trails the record 2.1 million filings in 2005, when 630,000 Americans filed in the two weeks before revisions to federal bankruptcy laws in October made it more difficult for individuals to erase debts.
There were 590,500 filings in 2006 and 827,000 in 2007.
