Business Bankruptcies Tick Up; Overall Filings Lowest Since 2007

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By Diane Davis

July 27 — Bankruptcy filings fell 6.9 percent for the 12-month period ending June 30, 2016, while Chapter 11 reorganization filings increased by 18.8 percent compared with the previous year, according to new statistics released July 27 by the Administrative Office of the U.S. Courts (AOUSC).

The increase in Chapter 11 filings is most likely the result of an increase in oil and gas bankruptcy filings, Prof. Robert Lawless, University of Illinois, told Bloomberg BNA July 27.

“There are a lot more people in the supply line in the oil and gas industry, compared to the coal industry, which results in a ripple effect and a higher number of bankruptcy filings,” Lawless said.

Oil, Gas Bankruptcies Cause Uptick?

“For about the past 18 months, there has been a steady flow of small and mid-cap oil and gas companies filing Chapter 11 cases in Delaware and Texas; a result of low oil prices shaking out higher cost production,” Prof. Stephen J. Lubben, Harvey Washington Wiley Chair in Corporate Governance & Business Ethics at Seton Hall University School of Law, Newark, N.J., told Bloomberg BNA July 27. Lubben is a contributing author of Bloomberg Law: Bankruptcy Treatise.

“Business bankruptcy lawyers have been much busier in 2016 than in prior years — especially involving cases in the energy sector but not limited to that,” Prof. Melissa Jacoby, University of North Carolina—Chapel Hill, N.C., told Bloomberg BNA July 27.

Prof. Charles J. Tabb, of counsel, Foley & Lardner LLP and Mildred Van Voorhis Jones Chair in Law, University of Illinois, Champaign, Ill., agreed with Jacoby, noting that there have been a lot of “energy-related cases, so that is part of it, but it isn’t the whole thing.” “There have been a lot of retailer filings too. It’s like a second (or third) wave post-Recession coming home to roost,” Tabb said. Tabb is an editor of Bloomberg Law: Bankruptcy Treatise.

According to Jacoby, “the real question is what bankruptcy can do for these businesses and whether they are so overleveraged once they finally file that it is almost impossible to save them. It is also interesting to watch where in the country the cases are getting filed — for example, keep an eye on Texas,” she said.

Lowest Number Since 2007

The AOUSC's statistics show that 819,159 cases were filed in federal bankruptcy courts during the 12-month period ending June 30, 2016, down from the 879,736 bankruptcy cases filed in 2015.

This is the lowest number of bankruptcy filings for any 12-month period since December 2007, the AOUSC said. The rate of decline, however was less than 10 percent for the second straight quarter. There have been consecutive double-digit declines in every reporting period since December 2011, according to the AOUSC.

Business vs. Non-Business

Non-business bankruptcies have continued to decline steadily, but business bankruptcies didn't decline during this reporting period, according to the AOUSC.

During the 12-month period ending June 30, 2016, the total number of business filings was 25,227, up from 25,046 in the previous year.

The total number of non-business filings was 719,932, down from 854,690 in the previous year

Breakdown by Chapter

Bankruptcy filings by chapter of the Bankruptcy Code ending June 30, 2016, decreased for Chapter 7 and Chapter 13 filings. In Chapter 7 filings, a debtor's nonexempt assets are liquidated and the proceeds are distributed to creditors, and in Chapter 13 filings, individuals receiving regular income can obtain debt relief while retaining their property by proposing a plan that uses future income to repay a portion of their debts over a three to five year period.

Bankruptcy filings ending June 30, 2016, increased for Chapter 11 filings, which is for businesses or individuals whose debts exceed the statutory thresholds for Chapter 13, and Chapter 12 filings, which is for family farmers or fishermen.

The number of bankruptcies filed by Bankruptcy Code chapter ending June 30, 2016, are as follows:

  •  Chapter 7 (consumer liquidations) filings totaled 509,769, down from 568,679 the previous year.
  •  Chapter 11 (reorganizations) filings totaled 7,928, an increase from 6,672 the precious year.
  •  Chapter 12 (family farmers or fishermen bankruptcies) filings totaled 459, an increase from 357 the previous year.
  •  Chapter 13 (consumer reorganizations) filings totaled 300,858, down from 303,945 the previous year.

To contact the reporter on this story: Diane Davis in Washington at

To contact the editor responsible for this story: Jay Horowitz at

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