Tag Archives: Consumer bankruptcies

Consumers and Businesses Buckle under their Debts, by Wolf Richter

Posted on July 7, 2017 | Leave a comment

Towards the end of a long-running recovery you would expect bankruptcies to tick up, and so they are. From Wolf Richter at wolfstreet.com:

Bankruptcies surge as the “credit cycle” exacts its pound of flesh.

Commercial Chapter 11 bankruptcies – an effort to restructure the business, rather than liquidating it – jumped 16% year-over-year in June to 581 filings across the US. Total commercial bankruptcies of all types, by large corporations to tiny sole proprietorships, rose 2% year-over-year to 3,385 filings, according to the American Bankruptcy Institute. This was up 39% from June 2015 and up 18% from June 2014.

Commercial bankruptcies topped out at 9,004 in March 2010. By that time, credit conditions had been easing for a year, and liquidity was chasing yield. Not much later, even zombie companies – if they were large enough – were able to refinance their debts and borrow more to fund their operations and keep creditors happy. Bankruptcies fell sharply: In September 2015, they bottomed out at 2,217 filings.

Then the energy bust hit. Oil-and-gas companies along with coal companies began toppling, and bankruptcy filings surged. But in 2016, oil prices more than doubled off their lows. New money began pouring into the sector again. And drillers that had been cash-flow negative for two decades and had lost dizzying piles of money were able to refinance their debts and get new money to drill into the ground and live another day. And the waves of energy bankruptcies receded.

But now the next wave is building, with large and small retail operations at the forefront. I’ve covered only the largest chains of the brick-and-mortar meltdown, but there are many smaller operations, mom-and-pop stores, fashion shops, and the like that have quietly given up.

Bankruptcies are very seasonal, with peaks around the end of tax season and sharp declines in the following months. The data, which is not seasonally adjusted, gives a raw and noisy impression of how businesses are faring in this economy.

To continue reading: Consumers and Businesses Buckle under their Debts

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Great Debt Unwind: Consumer Bankruptcies Jump, First since 2010. Commercial Bankruptcies Spike, by Wolf Richter

Posted on April 8, 2017 | Leave a comment

Increasing commercial and consumer bankruptcies is generally not a sign of economic vigor. From Wolf Richter at wolfstreet.com:

But don’t blame the oil bust.

Commercial bankruptcy filings, from corporations to sole proprietorships, spiked 28% in March from February, the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012. They’re up 8% year-over-year. Over the past 24 months, they soared 37%! At 3,658, they’re at the highest level for any March since 2013.

Commercial bankruptcy filings skyrocketed during the Financial Crisis and peaked in March 2010 at 9,004. Then they fell sharply until they reached their low point in October 2015. November 2015 was the turning point, when for the first time since March 2010, commercial bankruptcy filings rose year-over-year.

Bankruptcy filings are highly seasonal, reaching their annual lows in December and January. Then they rise into tax season, peak in March or April, and zigzag lower for the remainder of the year. The data is not seasonally or otherwise adjusted – one of the raw and unvarnished measures of how businesses are faring in the economy.

Note that there is no “plateauing” in this chart: since the low-point in September 2015, commercial bankruptcies have soared 65%! That red spike is the mega-increase in March:

At first, they blamed the oil bust. The price of oil began to collapse in mid-2014. By 2015, worried bankers put their hands on the money spigot, and a number of companies in that sector, along with their suppliers and contractors, threw in the towel and started filing for bankruptcy protection. But now the price of oil has somewhat recovered, banks have reopened the spigot, Wall Street has once again the hots for the sector, new money is gushing into it, and oil & gas bankruptcy filings have abated.

To continue reading: Great Debt Unwind: Consumer Bankruptcies Jump, First since 2010. Commercial Bankruptcies Spike

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Consumer Bankruptcies Rise for the First Time since 2010, by Wolf Richter

Posted on February 5, 2017 | Leave a comment

The latest debt bubble is starting to deflate. From Wolf Richter at wolfstreet.com:

A red flag that’ll be highlighted only afterwards as a turning point.

US bankruptcy filings by consumers rose 5.4% in January, compared to January last year, to 52,421 according to the American Bankruptcy Institute. In December, they’d already risen 4.5% from a year earlier. This was the first time that consumer bankruptcies increased back-to-back since 2010.

However, business bankruptcies began to surge in November 2015 and continued surging on a year-over-year basis in 2016, to reach a full-year total of 37,823 filings, up 26% from the prior year and the highest since 2014. Retailers and companies affiliated with the energy sector, in particular, were sinking deeper into the mire.

Throughout that time, consumer bankruptcy filings continued to decline year-over-year until November 2016. And that was the low point. Then credit stress began to exert its pressure and became apparent in the official channels, when arising number of consumers started throwing in the towel over the past two months to seek protection from creditors in bankruptcy court.

Total bankruptcy filings by consumers and businesses have now also risen year-over-year for two months in a row, for the first time since 2010.

Bankruptcy filings are highly seasonal, reaching their annual lows in December and January. Then they spike into tax season, peak in March, and zigzag lower for the remainder of the year. The data is not seasonally or otherwise adjusted. It’s raw and unvarnished, with large seasonal swings.

The chart below of total US bankruptcy filings shows the drop in filings since the Great Recession through November 2016. The red line denotes the trend of the low points (December, January), and how the trend changed direction over the past two months:

To continue reading: Consumer Bankruptcies Rise for the First Time since 2010

 

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