Epiq Systems, Inc., a provider of managed technology for law firms, advises that total business bankruptcy filings in the United States have increased by 5% on a year-on-year basis, to a total of 65,511.
However, while consumer bankruptcy filings were up 5%, business Chapter 11 filings were up 30% on the same basis, from 298 Chapter 11 filings in November 2014 to 390 filings in November, 2015.
Nevertheless, the Wall Street Journal has just reported that the United States economy expanded at a modest pace in November 2015, with a rise in consumer spending and the beginnings of increased demand for labor. According to the Fed, there was modest or stronger growth in 10 out of its 12 districts.
The reports from Epiq and from the Fed come amid anticipation that the Federal Reserve’s Open Market Committee will begin the process of raising interest rates — at or near zero for the past many years — at the Committee’s December 15 meeting in Washington, DC. As Fed Chair Janet Yellen has noted, waiting too long to end the era of near-zero interest rates might result in the Fed tightening too quickly and causing market dislocations.
On the other hand, once the Fed begins tightening the screws on interest rates, it is entirely unclear what effect this will have on bankruptcy filings. Right now, there are plenty of credit facilities out there in the economy that can be handled relatively easily at current interest rates, but may become ever so much dicier at higher rates. Or, to mangle the metaphor, one can quote from the Sage of Omaha Warren Buffett:
“Only when the tide goes out do you discover who’s been swimming naked.”
Do you have any feedback, thoughts, reactions or comments concerning the increase of business bankruptcy filings? Feel free to leave a comment below for Joel R. Glucksman of if you have any questions about this post or would like assistance with your legal needs, please contact me or the Scarinci Hollenbeck attorney with whom you work.
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