By the end of 2023, 434,064 Americans had filed for bankruptcy, with an additional 18,926 businesses filing. However, in the United States, some regions can be subject to different financial circumstances and some states, such as Alaska, had relatively few bankruptcies by the end of 🃏the year, while others like California had a much larger percentage of filings.

Understanding Bankruptcy Rates

For people or businesses unable to repay their outstanding debts, 澳洲幸运5官方开奖结果体彩网:bankruptcy offers a way both for debtors to unload their financial burden and for 澳洲幸运5官方开奖结果体彩网:creditors to receive some reimbursement for their investment. The petition to initiate this legal proceeding can be filed by either party, though it is more commonly done by the debtor. The debtor's assets are measured and evaluated as part of the process, and then likely are used to repay at least a portion of the outstanding debt.

The bankruptcy rate is a measure of all bankruptcy filings submitted for a select area during a given year. This information is released monthly by the American Bankruptcy Institute (ABI), which lists the cumulative filings for each U.S. state, territory, and the District of Columbia. The ABI further breaks down this information by the amount and percentage of each of the three most common bankruptcy chapters, in addition to including statistics about how the number of filings differs month-over-month.

Keep in mind that the rate only lists how many people and businesses were able to successfully file for bankruptcy each year, not the total number that actually applied. The official website of the U.S. Courts gives us a slightly clearer picture—a monthly report detailing the number of filed, terminated, and pending bankruptcy cases. Note that the U.S. Courts is currently three months ahead of the ABI.

Differences Among Bankruptcy Chapters

Several different kinds of bankruptcy filings fall under the Bankruptcy Code. As part of the ABI's monthly bankruptcy numbers, the total filings for each state are broken down by which of the three biggest bankruptcy chapters—澳洲幸运5官方开奖结果体彩网:Chapter 7, 澳洲幸运5官方开奖结果体彩网:Chapter 11, and 澳洲幸运5官方开奖结果体彩网:Chapter 13—they are filed under. Below are descriptions of th🍨ese chapters, in addition to the total number of filings for each one as of Dec. 31, 2023.

• Chapter 7: This chapter applies to anyone (primarily individuals, though businesses can also take advantage of it if they have few to no assets) wishing to be free of 澳洲幸运5官方开奖结果体彩网:unsecured debts (i.e., those not backed by collateral). Nonexempt assets are gathered and sold to repay as much of the unsecured debt as possible. As of the end of the year, there were 261,277 Chapter 7 bankruptcies filed in 2023.
• Chapter 11: This chapter is more commonly filed by businesses and very rarely by individuals. After filing for Chapter 11, companies are able to continue operating while they develop a debt repayment plan under the court's supervision. This gives these businesses a chance to reorganize, in addition to devising new ways to raise revenue and cut costs. As of Dec. 31, there were 7,456 Chapter 11 bankruptcies filed in 2023.
• Chapter 13: If an individual or business earns an income high enough to disqualify them from filing for Chapter 7, this chapter serves as an alternative. Also known as a 澳洲幸运5官方开奖结果体彩网:wage earner's plan, Chapter 13 gives debtors more time to repay their creditors while also retaining their nonexempt assets. This is accomplished via a 澳洲幸运5官方开奖结果体彩网:reorganization of the debtor's finances under the supervision and approval of the courts to create a short-term repayment plan, typically three to five years long. As of Dec. 31, there were 183,956 Chapter 13 bankruptcies filed in 2023.

Additionally, a 2020 report found that Black filers were more likely to choose Chapter 13—steered that way by attorneys who charged $1,000 to file Chapter 7 but lower or no upfront fees to file Chapter 13. As Chapter 13 lacks the same 澳洲幸运5官方开奖结果体彩网:garnishment and 澳洲幸运5官方开奖结果体彩网:debt collector protections as Chapter 7—and sets up repayment plans instead of removing debt—it is ultimately more expensive.

A 2017 study from ProPublica also found that Black Chapter 13 filers were also less likely than their White peers to complete their repayment plans. When nonpayment results in their cases being dismissed—resulting in their protection from creditors being removed—many of these debtors can become stuck in a cycle of continuously filing for bankruptcy just to keep the lights on. This means losing money due to partially paying back their debts and then having to start over again. Although the study's data was specific to Memphis, the pattern also holds true for Black debtors and Chapter 13 filings in the rest of the South.

Other notable bankruptcy chapters include Chapter 9, 澳洲幸运5官方开奖结果体彩网:Chapter 12, and 澳洲幸运5官方开奖结果体彩网:Chapter 15. The ABI's dataset, however, doesn't include any information on the total number of filings under th🌞ese chapters.

State-by-State Breakdown

As of January, the total cumulative filings for all U.S. states, territories, and the District of Columbia in 2024 was 36,607. This represents a 17% increase 澳洲幸运5官方开奖结果体彩网:year to date (YTD).

At 212, Alaska had the fewest cumulative bankruptcy filings in 2023, whereas California's 38,597 was the highest number reported for the same year.

A Closer Look at Bankruptcy Rates by State

Bankruptcy rates provide insight into how individuals and businesses in different areas of the U.S. are handling their debt burdens. Of course, we can't directly infer much information with just bankruptcy filings, but they can help us make educated hypotheses based on the number of filings, the rate of increase or decrease, and the type of filings in question.

For example, 83% of New Mexico's bankruptcy filings were Chapter 7, compared to just 0.7% for Chapter 11. Conversely, Delaware's Chapter 7 and Chapter 11 filings were 39% and 36%, respectively. From this—given that Chapter 7 filings are typically submitted by individuals whereas businesses generally file under Chapter 11—we can reasonably hypothesize that New Mexico's economic circumstances are more favorable toward companies than toward the general population. Meanwhile, Delaware's percentages seemingly indicate that both are facing challenges with their debt; however, businesses seem to be struggling slightly less than individuals.

Of course, any conclusions drawn from the ABI data are purely speculative and would require additional research to support them. For instance, another possible conclusion one might draw from New Mexico's bankruptcy rates is that the percentage of Chapter 11 filings is so low because there are simply not that many businesses operating in the state. However, considering that there were 66,732 filings reported for New Mexico in 2023, the above hypothesis seems far less probable.

Here's one last example of how bankruptcy rates can be used. The number of bankruptcy filings has been declining since 2019. However, bankruptcies are now on the rise again, increasing 16.8% year over year. From this, we can make a few reasonable hypotheses. Potentially the mos🎉t plausible one is that stimulus payments and other economic measures kept people and companies afloat in 2021, but the end of those measures coupled with a highly inflationary environ𒊎ment has caught up with many Americans.

The Bottom Line

Watching how bankruptcy filings change each year gives an interesting look at the country's economic state. While the nation enjoyed a brief reprieve from bankruptcies in 2021 and 2022, those rates began to rise in 2023. It remains to be seen if bankruptcie෴s will stall or continue to climb in 2024.