Business Bankruptcies Slide by 22 Percent in First 9 Months
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Business Bankruptcies Slide by 22 Percent in First 9 Months of 2012

October 12, 2012

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The total number of commercial bankruptcies in the United States fell by 22 percent during the first nine months of 2012, compared with the same time period a year ago, according to a report from Bloomberg Businessweek.

All told, 44,750 businesses filed for corporate bankruptcy between January and the end of September this year, which is much lower than the 57,613 business bankruptcies that were filed during the first nine months of 2011.

The figures, which were compiled by the American Bankruptcy Institute, are partially attributable to historically low interest rates, which allow businesses to secure loans at remarkably cheap prices.

And the numbers also spell good news for the American economy, which has been sputtering since the housing market crashed in 2008, causing a domino effect of fiscal crises for American businesses.

According to Samuel Gerdano, the executive director of the American Bankruptcy Institute, businesses are "on pace for the lowest total bankruptcies since before the financial crisis in 2008."

And while business bankruptcies are on the decline, the total number of consumers filing for personal bankruptcy has also been falling for the last several months.

Sources indicate that noncommercial bankruptcy filings, which mostly include petitions filed by individual consumers, fell by 14 percent in the first nine months of 2012 to a total of 876,000.

Total filings, including commercial and noncommercial requests for bankruptcy relief, fell by 14 percent during that same period to 921,000. So, businesses and individuals alike seem to be shying away from bankruptcy courts.

However, financial experts are quick to note that consumer bankruptcies remain at levels that are still considered very high. And the availability of cheap credit has allowed many businesses and consumers to take out new loans to pay down old debts.

When interest rates take their inevitable climb, whether that happens one year or five years from now, consumers will discover that cheap credit comes at a price, and bankruptcy courts might once again be flooded with new petitioners.

A higher number of bankruptcy filings, however, will not necessarily spell financial doom. In fact, a healthy economy often sees high rates of bankruptcy filings, as consumers shed excessive debts and businesses reorganize to be more profitable.


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