Business Trends

Small-Business Bankruptcy Filings Up 81% In June

In Uncategorized on August 11, 2009 at 7:41 pm

Commercial bankruptcies among the nation’s more than 25 million small businesses increased by nearly 81% in June 2009 from June 2008, according to Equifax Inc., which analyzed its comprehensive small business database for the study.

There were 10,339 bankruptcy filings in June 2009 throughout the U.S., up from 5,712 a year ago, according to the data.

California is the most negatively affected state with 10 MSA’s (metropolitan statistical areas) among the 15 areas with the most commercial bankruptcy filings during June. Los Angeles, Riverside/San Bernardino and Sacramento metropolitan areas led the nation in small-business bankruptcy filings. The other MSA’s with the most bankruptcy filings during the month include:

Charlotte-Gastonia-Concord, NC-SC
Atlanta-Sandy Springs-Marietta, GA
Portland-Vancouver-Beaverton, OR-WA
Dallas-Plano-Irving, TX
New York-White Plains-Wayne, NY-NJ
California (excluding MSA’s within the state)
Oakland-Fremont-Hayward, CA
Santa Ana-Anaheim-Irvine, CA
Denver-Aurora, CO
San Diego-Carlsbad CA
Oregon (excluding MSA’s within the state)
Houston-Sugar Land-Baytown, TX

“The data shows that the economic pain is continuing for small businesses across the country,” said Dr. Reza Barazesh head of North American research for Equifax’s Commercial Information Solutions division. “While it may not be quite as intense in some areas as what we saw earlier this year, we’re still seeing hefty increases in the number of bankruptcies in a lot of major metro areas. ”

The Atlanta MSA increased to 208 bankruptcies from 93 a year ago; Houston increased to 153 from 84; and Charlotte, which wasn’t even in the top 15 a year ago, had 225 bankruptcies in June, the fourth highest of any MSA.

The company’s report also listed the 15 metro areas with the fewest small-business bankruptcy filings. They are:

Springfield, MA
Lafayette, LA
Cedar Rapids, IA

Charleston, WV
Hagerstown-Martinsburg, MD-WV
Hawaii
Huntington-Ashland, WV-KY-OH
Clarksville, TN-KY
Gainesville, FL
Gulfport-Biloxi, MS
Huntsville, AL
Lynchburg, VA
Baton Rouge, LA
Beaumont – Port Arthur, TX
Brownsville-Harlingen, TX

For the analysis, Equifax analyzed both Chapter 7 and Chapter 13 filings. Chapter 7 is a liquidation proceeding in which a debtor receives a discharge of all debts, while Chapter 13 is a reorganization bankruptcy enabling filers to pay off debt over a set period of years.

According to IBISWorld, an industry research firm, the key difference in bankruptcy law – as a result of the Bankruptcy Abuse Prevention and Consumer Protection Act – is that the qualification requirements for a Chapter 7 filing, under which non-exempt assets are liquidated to pay some debts and many remaining debts are canceled, have become more stringent.

This means that those unable to qualify under the new rules are left with the less palatable choice of a Chapter 13 filing, under which debts must be repaid over a period of up to five years under court supervision. Any debts not addressed by the court plan under Chapter 13 are generally forgiven, though the filer’s access to credit is restricted for a period of up to ten years.

IBISWorld notes that in 2005, the year before the new legislation took effect, 71.4% of business bankruptcy filings fell under Chapter 7, compared to 60.3% in 2006.

Headquartered in Atlanta, Georgia, Equifax Inc. operates in the U.S. and 14 other countries throughout North America, Latin America and Europe. Equifax is a member of Standard & Poor’s (S&P) 500(R) Index.

Headquartered in Los Angeles, California, IBISWorld  is recognized as the nation’s most trusted independent source of industry and market research. The firm provides  a comprehensive database of unique information and analysis on over 700 U.S. industries – offering the largest collection of industry reports available.

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