Business Bankruptcy on the Rise

May 14, 2008

The U.S. economy seems to be tumbling down a rabbit hole that is deeper, darker, and more bizarre than the one Alice found herself in. According to data compiled by Jupiter eSources, an Oklahoma City company that runs a database called Automated Access to Court Electronic Records (AACER), U.S. businesses are seeking bankruptcy protection at a faster rate than consumers this year.

AACER reported that more than 5,000 firms filed for bankruptcy in April 2008, the most in any month since new bankruptcy laws took effect in 2005. The data also showed that in the first quarter of 2008 13,155 businesses filed for bankruptcy, an increase of nearly 45 percent from the 9,103 business bankruptcy filings made during the same period in 2007.

Economists suggest that the leap in bankruptcy filings are a result of the troubles that started with sub-prime mortgages and other financial instruments of Wall Street, which are now trickling down to Main Street. The ensuing credit crunch, skyrocketing commodity prices, and dormant sales are likely culprits for pushing many more businesses to the brink of bankruptcy throughout 2008.

NSBA has been a staunch advocate in pressing Congress to take action on opening up access to capital for small-business owners; reforming the credit card industry and its predatory practices; and addressing the nation’s energy crisis that inhibits consumer spending and small business growth. NSBA believes that a healthy and robust small-business community is the only way for the U.S. economy to bounce back.