Data released on Wednesday indicated that, even though the number of bankruptcy cases filed in the United States increased by 18% in 2023 due to increased interest rates, stricter lending guidelines, and the ongoing removal of backstops from the epidemic, the number of cases is still far below what it was before the COVID-19 outbreak.
According to data from bankruptcy data supplier Epiq AACER, the total number of bankruptcy filings, which includes both personal and business insolvencies, increased to 445,186 last year from 378,390 in 2022.
Reports on Chapter 11 business reorganization files for commercial purposes showed a 72% increase to 6,569 from 3,819 the previous year. From 356,911 in 2022 to 419,155 in 2023, a rise of 18% in consumer filings.
Despite being down 16% from the previous year, the total number of filings for the year ended in November at 34,447, down from 37,860.
It is anticipated that the number of bankruptcy cases will continue to rise in 2024, although it will take some time to surpass the 757,816 cases that were submitted in 2019, the year before the pandemic.
“As anticipated, we saw new filings in 2023 increase momentum over 2022, with a significant number of commercial filers leading the expected increase and normalization back to pre-pandemic bankruptcy volumes,” stated Michael Hunter, vice president of Epiq AACER. “We expect the increase in the number of consumer and commercial filers seeking bankruptcy protection to continue in 2024 given the runoff of pandemic stimulus, increased cost of funds, higher interest rates, rising delinquency rates, and near historic levels of household debt.”
As per the New York Federal Reserve’s figures, household debt reached a record high of $17.3 trillion by the end of the third quarter. The data also indicated that although delinquency rates are rising, they are still lower than they were right before the epidemic.
The Fed’s relentless interest rate hikes to control inflation have resulted in markedly tighter financial conditions for families and businesses during the past two years. For example, mortgage loan rates skyrocketed to their highest levels since the year 2000 during the second part of last year.
Nevertheless, with the Fed signaling that it was nearing the end of its rate-hike cycle, borrowing costs and general financial conditions decreased during the fourth quarter of 2023. Last month, Fed officials themselves stated that they anticipate decreasing rates this year.
