More firms turning to bankruptcy
Posted on Wednesday, May 7, 2008
Business bankruptcy filings in the United States increased 49 percent in April from a year earlier, the biggest increase so far in 2008, as the slowing economy prompted more companies to shut down or seek protection from creditors.
Business petitions rose to 5, 173 during the month, according to statistics compiled from court records by Jupiter eSources LLC in Oklahoma City.
More than 18, 000 businesses filed for bankruptcy protection in the first four months of 2008 to liquidate or reorganize. Through April, about 2, 700 companies sought relief from creditors under Chapter 11 of the federal bankruptcy code. Almost 43, 000 businesses went into bankruptcy last year, including more than 6, 200 in Chapter 11.
In Arkansas, 236 commercial bankruptcies were filed through the first four months of the year, said Mike Bickford, president of Automated Access to Court Electronic Records, an affiliate of Jupiter eSources.
That is an average of about 59 bankruptcies a month, a 23 percent increase over 2007, which averaged about 48 a month for a total of 583, Bickford said. In 2006, commercial bankruptcies averaged about 35 a month.
The Arkansas bankruptcy filings constitute less than 1 percent of the more than 83, 000 businesses in the state that have paid employees, which doesn’t include thousands of self-employed individuals, said John Shelnut, administrator of economic analysis and tax research for the state Department of Finance and Administration.
Total U. S. bankruptcy filings in April, including those by individuals, were up 31 percent from a year earlier to 93, 096, the group said. In Arkansas, there were 4, 545 business and personal bankruptcy filings in the first four months of 2008, compared with 3, 684 in that period a year earlier.
Signs of distress, such as bankruptcies and foreclosures, are rising as economic growth has slowed to its weakest pace since the recession in 2001. The economy lost jobs in April for the fourth consecutive month, for a total of 260, 000 jobs cut so far this year.
As the country faces its worst housing recession in a quarter century, almost 650, 000 properties were in some stage of foreclosure during the final quarter of 2007, up 112 percent from a year earlier, Irvine, Calif.-based RealtyTrac, which monitors foreclosures, said last week.
Foreclosures and bankruptcies alike are increasing as falling home prices make it harder to refinance before adjustablerate mortgages reset.
Through March, there were 4. 64 bankruptcies filed in Arkansas for every 1, 000 people, Bickford said.
“That ranks eighth in the nation,” Bickford said. “But that’s a Southern phenomenon. Tennessee ranks No. 1, and Georgia and Alabama are ranked high, also.” Tougher lending standards are making it harder for small businesses and homeowners to stay afloat. The Federal Reserve said Monday that the proportion of banks making it tougher for companies and consumers to borrow approached a record in the past three months as the credit crunch intensified.
Bickford said in an e-mail that he anticipated 2008 bankruptcy filings, both business and personal, will total about 1. 1 million compared with 827, 000 in 2007 and 590, 000 in 2006, after a new federal law took effect in October 2005 that made it harder for people to erase debt.
There were more than 90, 000 total bankruptcy filings in March, Jupiter eSources reported last month.
Computed on the basis of daily filings of all types, April petitions declined less than 2 percent compared with March, halting increases in the first three months of 2008. Information for this article was provided by Bill Rochelle and Bob Willis of Bloomberg News and David Smith of the Arkansas Democrat-Gazette.
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