Both consumer and business bankruptcy filings continued to slide downward in April 2014, when compared to the same period one year ago. It is presumed that the decline is due to the continuation of low interest borrowing rates for businesses and less consumer spending for individuals. Whether this is due to consumers being smarter, or a reflection of tighter credit limits imposed by lenders and credit card companies, is uncertain.
Based on information provided by Epiq Systems and the American Bankruptcy Institute (ABI), the total number of bankruptcy cases filed in the US declined 13% when comparing April 2014 to April 2013. During the month of April 2014, there were a total of 87,954 cases filed, compared to a total of 100,770 cases filed in April of 2013. Further examinination of those numbers shows that consumer bankruptcy filings represented a 12% drop, while commercial filings accounted for a 24% decline. Comparing April 2014 to April 213, chapter 11 corporate reorganization filings also declined 4% (683 filings vs 711 filings).
The ABI has suggested that the decline is due to the sustained low interest rates for business borrowers, sluggish consumer spending, and the high costs required for all bankruptcy filings, all of which contributed to lower totals across all segments of bankruptcies.
It will be interesting to see if there is a jump in filing during the next few months, caused by improvements in the economy, coupled with more consumers receiving their tax, which they can then use to pay for their legal and filing fees.
Michael B. Katz, Esq.