Most bankruptcies are not the result of financial recklessness. Instead, they are often caused by unexpected expenses or losses of income.
Unfortunately, many people and companies feel that they have no other option than to file for bankruptcy every year.
In 2022, 387,721 individuals and businesses filed for bankruptcy, a 6.3% drop from 2021, when 413,616 filings occurred. However, 2023 has outpaced last year’s numbers. January saw a 19% increase from 2022, and February increased 18%. In addition, February’s numbers were two percent higher than January’s.
Despite these increases, the number of bankruptcy filings is still lower than pre-pandemic levels, which hit a high of 2 million (one in 55 households) in 2005. However, the weight of inflation has increased financial challenges for both individuals and businesses, increasing good and raw material costs. These price increases lead to greater borrowing, growing the debt loads of these entities.
In 2019, 10,056 businesses filed for bankruptcy, and this number increased to 1,375 in 2020. However, this number actually decreased in 2021, when only 6,691 companies filed for bankruptcy. The industry with the highest rate of filings was real estate, but many in the healthcare, banking, hospitality, construction and transportation industries were high as well.
Filings by chapter
Businesses file Chapter 11 bankruptcy, while individuals can file Chapter 7 and 13. In 2022, 225,455 and 157,087 individuals filed for Chapter 7 and 13 bankruptcy, respectively. In addition, 4,918 businesses filed for Chapter 11 bankruptcy. In every category, filings were lower than 2018-2021.
Highest filing states
The five top bankruptcy filing states in 2022 were California, Florida, Georgia, Illinois and Texas, which had 31,792, 26,724, 22,815, 20,393 and 19,533 filings, respectively.