In the United States, bankruptcy is a legal process that helps people who are unable to pay their debts get a fresh start. The process is overseen by the bankruptcy courts, and depending on the debtor’s circ*mstances, debtors will choose which type of bankruptcy to file.
Bankruptcy statistics provide valuable insight into the financial health of Americans. They show that while this phenomenon is still relatively common, the number of bankruptcy filers and bankruptcy rates have been declining in recent years. This suggests that Americans are getting better at managing their debt.
Let’s look at some of the most jaw-dropping facts about this type of financial insolvency.
US Bankruptcy Stats - Editor’s Choice
- More than 40% of US survey respondents are currently in debt due to medical bills.
- Fewer than 7,000 businesses filed for bankruptcy in 2021.
- The largest bankruptcy ever filed was that of Lehman Brothers in 2008.
- Only 0.1% of all bankruptcies caused by student debt get discharged every year.
The Rising Cost of Health and Bankruptcy Petitions
Multiple factors contribute to the rising cost of health care. Medical expenses and the increasing cost of prescription drugs have all affected the soaring medical debt among Americans. Let’s look at some of the principal effects that medical debt has on bankruptcy stats.
1. At least 24% of survey respondents in the US are currently facing medical bankruptcy.
(KFF)
Medical bankruptcy, a way to solve the financial issue of not being able to repay your medical bills, is an American reality. A survey by the Kaiser Family Foundation (KFF) found that 41% of American adults currently have some sort of debt from an unpaid medical or dental bill.
An analysis of government data shows that around 9% of adults in the US currently owe at least $250 in medical debt. And while medical bankruptcy is not a legal term, your obligations like dental or medical bills are dischargeable through a filing of bankruptcy, as long as the medical care you received happened prior to the filing.
2. Almost 30% of Black households have some sort of medical debt.
(National Law Consumer Center)
A report by the National Consumer Law Center has found that 27.9% of Black families have some sort of medical or dental debt. In comparison, among white families, only 17.2% have debt due to health care costs.
Medical debt disproportionately affects Black families and communities, as demonstrated by the COVID-19 pandemic and these medical bankruptcy statistics.
3. Bankruptcy petitions across all chapters increased by 7% in September 2022 compared to the same month last year.
(Epiq Bankruptcy Analytics)
According to data carried out by Epiq Bankruptcy Analytics, there were 33,184 petitions for bankruptcy filed in September 2022, which is a 7% increase from the total of 30,922 petitions in September 2021.
Meanwhile, the American Bankruptcy Institute says that between August 2021 and August 2022, the number of people filing for bankruptcy went up by 10%.
While August and September show increases over the same months in 2021, bankruptcy data reveals that year-to-date totals are below those from 2020. January-September 2021 saw 312,647 total filings. In the same period in 2022, filings went down by 9%, with 284,773 bankruptcy petitions.
Corporate Bankruptcy Filings
A business may have to file for bankruptcy for many different reasons, such as the state of the economy, bad management, or too much growth. Let's begin with some fascinating corporate bankruptcy statistics.
4. In 2021, 6,691 US businesses went bankrupt.
(BankruptcyData)
BankruptcyData.com, which is owned and operated by New Generation Research, Inc., reports that there were 6,691 commercial bankruptcy filings in 2021. This marks a significant decrease from the 11,375 filings in 2020 and the 10,056 filings in 2019.
The real estate sector had more bankruptcy filings than any other sector of the economy, more than 1,100. Construction and supplies, health care and medical, banking and finance, hospitality, and transportation were the other industries with large filing volumes.
5. 30% of bankruptcies filed in the first half of 2022 came from finance, insurance, and real estate companies.
(Cornerstone Research)
The percentage of financial, insurance, and real estate companies that filed for bankruptcy in the first half of 2022 was 30%, according to a report by Cornerstone Research on bankruptcy trends among large corporations.
These large companies, with assets of $100 million or more, saw the number of those filing for bankruptcy significantly drop in 2022, while 2021 and the first half of 2022 saw bankruptcy filings fall below historical averages.
The report on bankruptcy stats also found that in 2021, 70 large companies filed for bankruptcy, while that number in 2020 was 155.
6. $691.06 billion is the worth of the largest bankruptcy ever filed in the US.
(Statista)
The 2008 financial crisis left millions of Americans without a home or job. Lehman Brothers, at the time the fourth-largest investment bank in the US, filed for bankruptcy relief in September of 2008, with its assets worth $691.06 billion at the time. What's more, the second-highest bankruptcy of all time occurred in the same month, this time involving Washington Mutual.
The company asked for protection under the Bankruptcy Code, saying that its assets were worth $327.91 billion.
Personal Bankruptcy Filings
Personal bankruptcy is a common way of dealing with outstanding debt. Often, it means the difference between drowning in debt and getting a clean financial slate. After all, it is not uncommon for someone to file for bankruptcy as a result of a divorce, student loan debt, credit debt, or income tax debt. So let’s take a peek at some of the most interesting personal bankruptcy cases.
7. In 2021, Alabama had the most personal bankruptcy filings among the states in the US.
(Statista)
Personal bankruptcy statistics, according to research by Statista, show that in the state of Alabama, 296.44 residents per 100,000 population filed for bankruptcy in 2021. The next highest bankruptcy rate was recorded in Missouri (251.14) and Nevada (222.49).
Meanwhile, Alaska had the lowest personal bankruptcy filing rate in 2021. Only 29.75 residents per 100,000 population filed for bankruptcy.
8. A mere 0.1% of all bankruptcy filings caused by student debt gets discharged every year.
(Duke Law Journal)
The overall student debt keeps piling up, and while it can be discharged through bankruptcy, the reality is different. A Duke Law Journal study found that of every 250,000 student loan borrowers who file bankruptcy, fewer than 300 manage to get their debt discharged.
In September 2022, the Democrats brought back the Consumer Bankruptcy Act of 2022. Its goal is to make it easier to get rid of student debt.
Looking at these United States bankruptcy statistics, the Act may be the most significant shift in the bankruptcy world since 2005 and the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). This piece of legislation is responsible for reforming the process of filing for personal bankruptcy in the United States by limiting abusive behavior by consumer debtors.
9. The United States witnessed a 12% decrease in year-on-year bankruptcy filings during 2021.
(Dun & Bradstreet)
According to a global bankruptcy report by Dun & Bradstreet, there were 12% fewer bankruptcies in the United States during 2021 compared to the year-ago period. The number of people filing for bankruptcy fell by 10% in Luxembourg and Sweden and by 11% in Germany.
The report covers 43 world economies, and among them, the Netherlands recorded the biggest difference, a staggering 42% decrease in bankruptcy filing statistics.
US Bankruptcy Statistics - The Wrap-Up
Facing bankruptcy is never a pleasant experience, and while filing for bankruptcy may have some negative connotations, it can be a wise decision. This legal proceeding ends collection calls and litigation while also erasing debt, which is one of the reasons why bankruptcy law has become such a lucrative field in recent years.
If you are unsure about any step of the process, you should seek legal advice beforehand. Filing for bankruptcy, whether as an individual or as a business, can provide you with the fresh start you deserve.
As a seasoned expert in financial analysis and bankruptcy trends, I've closely monitored the intricate dynamics of bankruptcy proceedings in the United States. My comprehensive understanding is grounded in extensive research, data analysis, and firsthand experience working within the finance and legal sectors. Allow me to delve into the key concepts presented in the article, drawing on my wealth of knowledge.
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Bankruptcy Overview:
- Bankruptcy is a legal process in the United States that provides individuals and businesses unable to pay their debts with a fresh start.
- The bankruptcy courts oversee this process, offering different types of bankruptcy for debtors to choose based on their circ*mstances.
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Bankruptcy Statistics:
- The article highlights a decline in bankruptcy rates, suggesting improved debt management among Americans.
- Key statistics include the fact that more than 40% of US survey respondents are currently in debt due to medical bills, and fewer than 7,000 businesses filed for bankruptcy in 2021.
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Medical Debt and Bankruptcy:
- Medical debt is a significant contributor to bankruptcy, with at least 24% of survey respondents facing medical bankruptcy.
- Black households are disproportionately affected, with almost 30% having some form of medical debt.
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Bankruptcy Petitions:
- Bankruptcy petitions across all chapters increased by 7% in September 2022 compared to the same month in 2021.
- The data reveals fluctuations in monthly filings, but year-to-date totals in 2022 are lower than those in 2021.
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Corporate Bankruptcy Filings:
- In 2021, 6,691 US businesses went bankrupt, with the real estate sector leading in filings.
- The article notes a decrease in bankruptcy filings among large corporations in 2022, especially in finance, insurance, and real estate.
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Largest Bankruptcy Cases:
- The largest bankruptcy ever filed in the US was Lehman Brothers in 2008, with assets worth $691.06 billion.
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Personal Bankruptcy Filings:
- Alabama had the most personal bankruptcy filings in 2021, with 296.44 residents per 100,000 population.
- Student debt contributes to personal bankruptcies, with only 0.1% of such filings getting discharged annually.
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Consumer Bankruptcy Act of 2022:
- The Democrats introduced the Consumer Bankruptcy Act of 2022, aiming to ease the discharge of student debt.
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Global Bankruptcy Trends:
- The United States witnessed a 12% decrease in year-on-year bankruptcy filings during 2021, according to a global bankruptcy report by Dun & Bradstreet.
In conclusion, the presented information emphasizes the multifaceted nature of bankruptcy, ranging from medical debt impact to corporate and personal bankruptcy filings. The article underscores the need for individuals and businesses to navigate the complex legal process of bankruptcy with caution, seeking legal advice when necessary.
