August 6, 2012 - According to a recent report released by the American Bankruptcy Institute (ABI), total bankruptcy filings in the United States for July 2012 decreased 12 percent compared to the July 2011 filings. Total filings for July 2012 were 97,073, down from 110,173 filings in July 2011. The commercial only filings for July 2012 were 4,513, a decrease of 22 percent from the 5,800 filings for July 2011. The non-commercial only filings for July 2012 were 92,560, a decrease of 11 percent from the 104,373 filings for July 2011.
In Blackbird Asset Services home district, the Western District of New York (Buffalo and Rochester, New York area) the total July only total filings are also down year over year, but only by 1.2% (511 filings in July 2011 compared with 505 filings in July 2012. However, looking at the year-to-date cases through the end of July, total filings in this district are down 10.4% from 4,317 in 2011 to 3,868 in 2012.
So, what gives?
According to ABI Executive Director Samuel Gerdano, the decrease in bankruptcy filings continues to reflect the effects of sustained low interest rates coupled with weak consumer spending. With the Federal Government keeping rates artificially low, it is plausible that this trend will continue into the foreseeable future.
Further speculation as to the cause of the drop in bankruptcy filings ranges from tighter credit standards following the Great Recession to the higher costs of filing for bankruptcy. Some companies simply can’t afford to go bankrupt! (With unemployment rates still above 8% and climbing again, do we really feel like we are out of the recession?)
Having fewer bankruptcy filings creates less deal flow for all professionals that work with distressed businesses. As an auction company we need to be selective in what business we chase, and similarly other bankruptcy professionals need to be selective and price services smart.
Despite the decrease in the year-over-year bankruptcy filings, auction sales still remain a fantastic method to liquidate assets in an accelerated manner. Auctions create cash that is far more liquid than equipment or real estate, and it is easier to negotiate settlements between creditors when trading cash and not chattel.