Bankruptcy filings in the United States surge 18% in 2566. The trend is expected to continue in 2567.

Bankruptcy filings in the United States surge 18% in 2566. The trend is expected to continue in 2567 due to higher interest rates. Tighter lending standards

On January 3, 2566, Reuters reported that U.S. bankruptcy filings increased by 18% in 2566 due to higher interest rates, tighter lending standards, and the continued influx of bailout measures in the COVID-19 pandemic era, even though the volume of bankruptcy cases remained significantly lower than pre-COVID-19 levels.

According to data from Epiq AACER, a bankruptcy data provider, all bankruptcy filings, including both commercial and personal bankruptcies, are filed. Increased to 445,186 items in 2566 from 378,390 items in 2565.

Commercial Chapter 11 reorganization filings increased 72% to 6,569 from 3,819 a year earlier, the report said. Consumer filings increased 18% to 419,55 from 356,911 in 2566.

For the final month of 2566, the total number of filings dropped to 34,447 from 37,860 in November. This is despite a 16% increase from the previous year.

The number of bankruptcy cases is expected to continue increasing in 2567, although it still has some distance to surpass the 757,816 bankruptcy cases filed in 2562, the year before the pandemic.

Michael Hunter, Vice President of Epiq AACER, stated, “As expected, we saw new filings in 2566 gaining momentum over 2565, with a significant number of commercial filings leading to the anticipated increase and recovery back to pre-pandemic bankruptcy volumes.”

Adding that “We expect the increase in the number of consumer and commercial filers seeking bankruptcy protection to continue in 2567 due to the influx of pandemic stimulus measures. Increased financial costs higher interest rates Rising default rates and household debt at near-record levels.”

According to data from the Federal Reserve Bank of New York Household debt hit a record $17.3 trillion at the end of the third quarter, data showing default rates also rose. But it's still lower than pre-pandemic rates.

Financial conditions for businesses and households have become much tighter over the past two years as the Fed aggressively raised interest rates to control inflation. For example, mortgage rates surged in the second half of last year. highest since the beginning of the century

Meanwhile, borrowing costs and overall financial conditions eased in the fourth quarter of 4 after the Fed signaled the end of its cycle of raising interest rates. And last month, Fed officials said they expected to cut interest rates in 2566.

Reference: reuters.com

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