Business bankruptcy filings in the U.S. dropped 24 percent last year to their lowest mark since at least 2006, according to a report from the American Bankruptcy Institute. Overall, bankruptcies by businesses and individuals combined fell 13 percent, according to the report.
Total filings by businesses and individuals fell to 1.03 million in 2013, from 1.19 million in 2012. The number of filings fell in every state but rose by 7 percent in Puerto Rico, which has been troubled by a lengthy recession.
The average number of filings by businesses and individuals over the past five years was 1.32 million per year. That historically low level is partly the result of a 2005 law that made it harder for individuals to declare bankruptcy. In the 10 years leading up to enactment of the law, filing averaged 1.5 million per year, according to the ABI.
Bankruptcy filings by businesses and individuals spiked as the U.S. entered a recession in 2007. The numbers have fallen steadily in recent years as the U.S. Federal Reserve has kept borrowing costs low.
The latest report, which was compiled by bankruptcy claims processor Epiq Systems Inc., said 44,111 businesses filed for bankruptcy in 2013, down from 57,964 in 2012. Epiq's data goes back to 2007.
The U.S. bankruptcy court in Wilmington, Del., led the country in business Chapter 11 filings in 2013, according to the report. The U.S. bankruptcy court in Los Angeles led the country in Chapter 11 business filings between 2010 and 2012. Large U.S. businesses tend to incorporate in Delaware, which gives them the option to use the U.S. bankruptcy court there if they need protection from creditors.
Teresa Kohl, a bankruptcy expert at investment bank SSG Capital Advisors, said in 2014 she expects to see healthcare companies under stress because of regulatory changes. Agriculture businesses also could struggle as raw material costs increase. Finally, the number of business failures overall could grow if interest rates rise sharply, she added.