US Business Bankruptcies Dropped 24 Percent in 2013

Reuters – WILMINGTON, DELAWARE — Business bankruptcy filings in the United States dropped 24 percent in 2013 to their lowest level since at least 2006, according to a report on Monday.

Overall, bankruptcies by businesses and individuals combined fell 13 percent, said the report, released by the American Bankruptcy Institute.

Bankruptcy filings by businesses and individuals spiked as the United States entered recession in 2007. The numbers have fallen steadily in recent years as the U.S. Federal Reserve has kept borrowing costs low.

Monday’s report, which was compiled for the ABI by bankruptcy claims processor Epiq Systems Inc, said 44,111 businesses filed for bankruptcy in 2013, down from 57,964 in 2012. Epiq’s data goes back to 2007.

Total filings by businesses and individuals fell to 1.03 million, the report said, from 1.19 million in 2012. The number of filings fell in every state but rose by 7 percent in Puerto Rico, which has been hit by a prolonged recession.

The average number of filings by businesses and individuals over the past five years was 1.32 million per year. That historically low level is partly the result of a 2005 law that made it harder for individuals to declare bankruptcy. In the 10 years leading up to enactment of the law, filing averaged 1.5 million per year, according to the ABI.

Teresa Kohl, a bankruptcy expert at SSG Capital Advisors, an investment bank that specializes in corporate restructuring, said she expected businesses to continue to avoid filing for bankruptcy, even if it might be in their interests to do so.

“Bankruptcy is still viewed as expensive proposition and it’s something that people tend to avoid at all costs,” Kohl said. “I don’t think in 2014 there is going to be any dramatic change.”

For 2014, she said she expected to see healthcare companies under stress due to regulatory changes and agriculture businesses struggle as raw material costs increase. The number of business failures could grow if interest rates rise sharply, she said.

According to the report, the U.S. bankruptcy court in Wilmington, Delaware, led the country in business Chapter 11 filings in 2013. Among the large filings were battery-maker Exide Technologies, plug-in hybrid car-maker Fisker Automotive and the Edwin Watts Golf Shops chain.

Big U.S. businesses tend to incorporate in Delaware, which gives them the option to use the U.S. bankruptcy court there if they need protection from creditors.

The U.S. bankruptcy court in Los Angeles led the country in Chapter 11 business filings between 2010 and 2012. Its counterpart in Manhattan, also among the busiest in the country, last led in Chapter 11 business filings in 2009.