Commercial Bankruptcies By State
When businesses struggle, debt payments can make financial turnaround impossible. For companies in distress yet potentially viable, Chapter 11 bankruptcy is an option to restructure, and in some cases, dismiss some of the company’s debt. This process can be time consuming and costly, and it tends to be a better solution for large corporations rather than small businesses, according to a recent Brookings report. For small and mid-sized companies, bankruptcy costs can be as high as 30% of the business’s value, and a reorganization doesn’t make sense. Two-thirds of companies that file for Chapter 11 are liquidated rather than reorganized.
While there was a pre-pandemic uptick in Chapter 11 filings, commercial bankruptcies are also likely to increase due to economic hardships and depressed consumer demand in the pandemic. MoneyGeek has compiled bankruptcy filing data published by the American Bankruptcy Institute, updated monthly to track the ongoing economic impact of COVID-19.
Delaware, a favorite state for business incorporations because of low-tax rates and business-friendly policies, has the most business bankruptcy filings. While Delaware has experienced a large number of filings related to COVID-19, it doesnt necessarily have the highest rate of business bankruptcy filings. To adjust for state population differences, we based our rankings on filings per 10,00 businesses.
Mormons Less Likely To File For Bankruptcy
According to a 2007 study published in the Suffolk University Law Review:
Cultural characteristics often attributed to Mormons and The Church of Jesus Christ of Latter-day Saints do not account for Utah’s bankruptcy rates. In fact, certain aspects of this culture, such as employment services and welfare, may even be shielding Mormons from the full brunt of Utah’s current bankruptcy environment.
In a Deseret News interview with the study’s authors, one of them noted:
Our findings show that all Utahns, including Mormons, are suffering from an enormous bankruptcy glut, but Mormons are not experiencing it any more than any other Utahn. Our data reveal that in Utah non-Mormons are 4.6 percent more likely than their Mormon counterparts to find themselves in bankruptcy court.
Personal Bankruptcy Filings By State
Personal bankruptcy in the United States is a more frequent occurrence than many people realize. Over the past century, personal bankruptcy rates in the United States have increased dramatically. From 1900 to 1950, bankruptcy filings were essential rarities. Since 1960, however, a variety of reasons have contributed to bankruptcy rates consistently increasing in the United States. Over the past 25 years, this increase has become dramatic. An all-time high was reached in 2005 as more bankruptcy cases were filed than ever before. In that year, one of every 55 U.S. households went bankrupt. It is important to realize, however, that the definition and processes for personal bankruptcy filings are not the same in every state. This is why some states have a great number of bankruptcy filings each year, while others have very few.
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Three Strikes And You’re Out
Major life disruptions like divorce drive many American households over the financial edge into bankruptcy. All District states, except Illinois, had divorce rates higher than the 1996 national average of 4.3 per thousand. Tennessee, with a 6.5 per thousand rate, was ranked second in the nation behind Nevada, which had 10 divorces per 1,000 people. Arkansas and Mississippiwith divorce rates of 6.1 per thousand and 5.8 per thousand, respectivelytrailed Tennessee only slightly.
Major medical expenses, which the uninsured are particularly vulnerable to, are another leading cause of bankruptcy. In Arkansas and Mississippi, the proportions of residents without health insurance21.7 percent and 18.5 percent, respectively, in 1996are significantly higher than the national average of 15.6 percent. Illinois and Indiana, in contrast, have uninsured rates well below the national average. These lower rates are partially due to the large number of unionized manufacturing jobsjobs that tend to have medical insurancein the two states.
Number Of Bankruptcy Filings
The number of bankruptcy filings in the United States has steadily increased over the last century, and especially so from 1980 to 2005.
Bankruptcy filings hit an all-time high in 2005, when more than 2 million cases were started. In that year, one out of every 55 households filed for bankruptcy.
The following year, bankruptcy filings dipped to about 600,000, the lowest point in 20 years.
The vast majority of bankruptcies are now filed by consumers and not by businesses. In 1980, businesses accounted for 13 percent of bankruptcies. Today, they account for about 3 percent.
Top 10 States With The Most Chapter 7 Bankruptcies
- Jennifer Thomas
When it comes to why more people file for Chapter 7 bankruptcy in some states than they do in others, many factors come into play. States with high divorce rates, low median incomes and temperamental job markets can all cause bankruptcy filings to be higher, according to Michael Bovee, who has worked in debt resolution for 20 years and is the co-founder of Resolve.
A states laws also play a big role. Steep wage garnishment laws or laws that make it easy for creditors to seize assets can push more people toward bankruptcy to protect their assets, says Robert Haupt, a bankruptcy attorney with Lathrop Gage. Those laws also can influence the percentage of Chapter 7 or Chapter 13 bankruptcies.With Chapter 7, for example, states that let people protect more equity in their home or car make filing for Chapter 7 more attractive. Thats because the one major disadvantage of Chapter 7 over Chapter 13 is that people can potentially lose their homes in a Chapter 7 bankruptcy.
States where people make less money may also have higher rates of Chapter 7 bankruptcies because more people can pass the means test, a test that looks at a filers income and expenses to determine if they qualify for a Chapter 7 bankruptcy. Of the 10 states with the most Chapter 7 filings, only two, Illinois and Utah, have a median household income above the national average of $61,372.
States With The Least Debt
Texas has the lowest debt of any state in the U.S. Alaska‘s total liabilities add up to $222.64 billion, and its total assets add up to $356.01 billion, giving Texas the highest net position in the country of $115.08 billion. Texas’s debt ratio is 62.5%
Florida’s debt is the second-lowest in the country. With total liabilities coming out to $66.78 billion and total assets coming out to $163.24 billion, Florida’s net position is $97.6 billion. This means that Florida’s debt ratio is 40.9%. While Floridas debt has decreased in recent years, it is expected to increase over the next two years.
Alaska has the third-lowest debt and the third-highest net position of $76.74 billion. Alaska’s total liabilities add up to $12.65 billion, and its total assets add up to $89.17 billion. Although Alaska does not have a state income tax, its revenue is well-supplied by taxes on oil and gas production.
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Personal Bankruptcies 2020 Based On Demographic Profile
9. Well-educated people file 20% of American bankruptcies.
Many misconceptions are flying around when it comes to bankruptcy. But the simple truth is it can happen to anybody.
The American Bankruptcy Institute Statistics clearly show that, while 20% of filers have a college degree, 29% have some form of college education, and 36% are high school graduates. As you might recall, even President Trump has occasionally filed for corporate bankruptcy over the years. While the Trump bankruptcy cases were not individual claims, he has filed a chapter 11 bankruptcy claim as much as six times.
10. Personal bankruptcy rates for males are higher than for females .
According to findings by Dan Mangan at CNBC, men are more likely to file for bankruptcy than women. The gap between the two is very small, but the reasons are very different.
The majority of men who file for bankruptcy do so after losing high-paying jobs. In contrast, 48% of women who file for bankruptcy are forced to do so due to a divorce, as the divorce statistics show.
11. 60% of people who file for bankruptcy earn less than $30,000 a year.
Data on American bankruptcies show that many people filing for bankruptcy are on low household incomes. The figures also show that only 9.2% of people who earn $60,000 per year go bankrupt.
12. According to personal bankruptcy statistics, 64% of people who file for bankruptcy are married.
The Most Common Causes Of Bankruptcy
The data above comes from a survey of consumers who filed bankruptcy between 2013 and 2016. Debtors were able to choose multiple factors that contributed to their bankruptcy.
The usual recommendation on how much to save in an emergency fund is three to six months of living expenses. In our survey on Americans’ financial habits, we found that only 15% felt confident they could go without six paychecks or more before missing financial obligations.
Medical debt is often called the most common cause of bankruptcy, but that’s not quite the case. Medical expenses rank second, as they’re a factor in bankruptcy filings for 58.5% of consumers.
It should be noted that medical issues aren’t just a problem because they’re expensive. They can also result in a loss of income and even a job loss. That’s why having a plan for managing finances during a medical emergency is important, too.
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Nations Highest Bankruptcy Rates Found In The South
Personal bankruptcy filings in the U.S. last year fell to lows not seen since before the beginning of the Great Recession in 2007, according to the American Bankruptcy Institute. But while the tide of bankruptcies in 2015 ebbed nationwide, bankruptcy rates are still high in some parts of the country.
NerdWallet examined the most recent federal data to get a picture of bankruptcy filings at the state and county level. We analyzed U.S. Courts data to determine the number of personal bankruptcy filings per 100,000 residents in each state and county. The median bankruptcy rate among the 587 counties examined was 224 filings per 100,000 residents. Among the 50 states and Washington, D.C., the median bankruptcy rate was 226 filings per 100,000 residents.
Filing For Bankruptcy During Covid
a man and woman discuss their bankruptcy options as they review their debts
If you’ve been hit hard financially by the pandemic, you are not alone. Millions of Americans face unemployment, and many businesses have received government funds to help them try to weather economic devastation. Especially in the pandemic, there is no shame in facing financial hardships and feeling like you’re out of options.
If debt settlement or consolidation doesn’t offer a path out of your financial struggles, bankruptcy could be a viable option.
Bankruptcy can be hard to swallow emotionally, and it carries practical consequences like required waiting periods for future mortgages. Still, depending on your situation whether you’d file for bankruptcy individually or for your business learning about your bankruptcy options could give you some peace of mind.
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The Variables Of The Reports
Researchers disagree on the evidence for medical bills causing bankruptcies. The biggest problem in answering this question is that those filing for bankruptcy aren’t required to state the reason.
As a result, estimates are based on surveys. Therefore, the answer will depend on how researchers phrase their questions, and how the survey respondents define the cause of their bankruptcy.
A variety of factors cause bankruptcies. Many people with medical debt have other debts as well. They may also have a lower income, little savings, or have lost a job.
Medical debts are generally unexpectedmany Americans live paycheck to paycheck due to the cost of living, low wages, or living beyond their means. A sudden medical bill causes havoc in the financial lives of struggling people.
Almost a third of the respondents surveyed by KFF claimed they weren’t aware that a particular hospital or service wasn’t part of their plan. One-in-four found that their insurance denied their claims.
Many insured people are not aware that their policies have limits. High deductibles and co-payments can cause high debts, and annual/lifetime limits can cause an insurance plan to run out. Some insurance policies and companies will deny claims or cancel the insurance policy.
An Uptick Of Bankruptcies Is Predicted
Since the start of the coronavirus, personal bankruptcies have declined in most states compared to prior periods. Court closures have artificially slowed bankruptcy proceedings. Financial relief for businesses and individuals through the coronavirus relief bill, which delivered direct payments to individuals and Paycheck Protection Program loans to help businesses pay employee wages, has temporarily offset losses.
That does not mean Americans are out of the woods financially. Bankruptcies tend to be a lagging indicator of economic health, and some experts are predicting an abundance of bankruptcy filings in the coming months. MoneyGeek has analyzed the correlation between monthly unemployment levels and bankruptcy rates since 2006 and found a strong historical correlation except for the months following February 2020. Once the factors that are temporarily suppressing bankruptcy filings cease, the full economic impact of COVID-19 will become more evident. To gauge the financial effects of COVID-19 on individuals and businesses, MoneyGeek will be tracking bankruptcies over the next several months.
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Can We Turn Back The Tide On Bankruptcy In The United States
Bankruptcy is a widespread problem in United States and, as the statistics show, the situation continues to worsen every year. Since bankruptcy would appear to depend more on personal causes than on external economic factors, fighting bankruptcy might be most effectively done by focusing on resolving marital conflicts, reforming the medical insurance industry, and combatting high rates of unemployment.
States With High Numbers Of Bankruptcies
The number of annual bankruptcies varies widely by state. This is in part because bankruptcy policies are different in each state and because some states are more populous than others.
Additionally, studies have found that bankruptcy occurs more often in states with more lenient wage-garnishment laws.
The state with the most bankruptcies in 2011 was California, with more than 240,000. This accounted for 17 percent of all bankruptcies nationwide. At the other end of the spectrum, Alaska had fewer than 1,000 bankruptcies in the same year.
The five states with the most bankruptcy petitions in 2011 accounted for a disproportionate 38 percent of the years filings nationwide.
These states and the number of bankruptcies declared in 2011 are as follows:
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Us Bankruptcies 2020 Corporate Level
6. As of September 2020, 470 companies have gone bankrupt.
In light of the COVID-19 crisis that has negatively affected the economy, its not surprising to see more and more companies filing for bankruptcy. If we look at the historical data on corporate bankruptcies by year, the latest figure is bigger than the filings recorded during any comparable period since 2011.
7. Based on bankruptcy statistics, the consumer discretionary sector has the largest number of bankruptcies 93.
The bankruptcies 2020 report shows that most of the companies that filed for bankruptcy came from the consumer discretionary sector. The analysis is limited to public or private companies with public debts and assets or liabilities equal to $2 million or more at the time of bankruptcy filing. It also includes private companies having either assets or liabilities greater than or equal to $10 million at the time of filing.
8. The first three quarters of 2020 recorded the highest number of mega bankruptcies 52.
Historical bankruptcies data show that the number is greater than in any full year during the 20052019 period. The only exception is the year 2009 when mega bankruptcies reached 57. The analysis of mega bankruptcies covers companies with over $1 billion in assets at the time of filing.
What State Has The Highest Bankruptcy Rate
What State Has The Highest Bankruptcy Rate. Bankruptcy is a worthwhile consideration for anyone who struggling with debts they can’t expect to repay over the course of a few years, but it’s not. In the first seven months of 2019, nearly 43,000 workers lost their jobs when the companies they worked for filed for bankruptcy.
Specific publications address the work of the appellate, district, and bankruptcy courts The united states has the highest bankruptcy rate in the world. In comparison, alaska had the lowest bankruptcy filing rate, where 52.34 inhabitants per 100,000 filed for bankruptcy. Unsurprisingly, bankruptcy rates are the highest among those who earn the least. And other components of the u.s.
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Where Bankruptcies Stay High
Almost two years after lawmakers amended the U.S. Bankruptcy Code to reduce filing rates, several regions in the Southeast continue to see elevated numbers of consumer bankruptcy cases, a phenomenon some experts attribute in part to local culture.
Bankruptcy numbers over the past few months appear to be slowing down or leveling in many regions. Bankruptcy filings fell from May to June in more than 73% of the nation’s federal court districts, according to Jupiter eSources, a company that tracks bankruptcy data. But bankruptcies continue to rise or remain elevated in the three highest-filing states — Tennessee, Georgia and Alabama.
In Tennessee, 5.8 residents per 1,000 file for bankruptcy on an annual basis compared with the national average of 2.52 per 1,000. In Georgia and Alabama, the rates are 4.87 and 4.77, respectively.
Some experts say the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may have little effect on filing rates in states with chronically high bankruptcy rates. Economic and social factors such as low-paying jobs and high divorce rates often lead to financial hardship, but local bankruptcy experts say the sheer frequency of filings may also be whittling down the social stigma of filing.
“If your neighbor does it, it’s more likely you will do it,” said Dena K. Wise, a family economics specialist at the University of Tennessee. “It may be that has become something common among some certain neighborhoods.”
Write to Erika Lovley at