Commercial Bankruptcies Way Down in First Half of 2013, As Expected

Commercial bankruptcies have been on a steep decline all year, and the latest figures have continued to bear this out. There were 23,471 total commercial filings for the first six months of 2013, marking a 25% decrease from the 31,088 filings during the same period in 2012. Commercial Chapter 11 filings also fell to 3,445 in the first half of 2013, representing a 16% decline from the 4,120 commercial Chapter 11s filed during the same period last year.

Sustained low interest rates have created what American Bankruptcy Institute (ABI) Executive Director Samuel Gerdano referred to as "a new normal of reduced bankruptcies, as consumers and businesses continue to deleverage in a sustained low-interest-rate environment." Gerdano also noted that ABI expects this trend to continue for the remainder of 2013.

Last month alone there were 3,458 commercial filings, representing a steep 26% decrease from the 4,677 filings during June 2012. Chapter 11s also saw a drop in June 2013, though not as deep as commercial filings overall, falling 9% from 547 filings in June 2012 to 496 last month.

Low bankruptcy figures have been rough on bankruptcy law firms, and while the downward trend is expected to continue, it won't continue forever. As the Fed has noted time and again, once the job market recovers, it will consider raising interest rates in order to reduce inflationary pressure. Such an increase, however minor, could spur a new wave of bankruptcies among troubled consumers and businesses.

- Jacob Barron, CICP

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