Business Bankruptcy Numbers Continue Upward Trend

The number of U.S. business bankruptcies continues to rise in 2007, as the
third-quarter filings showed yet another increase in the number of businesses
seeking protection from creditors. The increase continues to reflect the
business insolvency forecast produced by leading accounts receivable insurer
Euler Hermes ACI earlier this year.

According to the U.S. Bankruptcy Courts, 7,167 businesses declared bankruptcy
in the third quarter of 2007, bringing the total for 2007 to 20,152. The
third-quarter figure shows a series of upward trends, including:

  • A 7% increase over the second quarter of 2007
  • A 35% year-over-year increase from the second quarter of 2006
  • A 45% increase for the first half of 2007 in comparison to the first half of
    2006
  • The number of business bankruptcies through three quarters of 2007 (20,152)
    now eclipses the total number for 2006 (19,695)

The Euler Hermes business failures forecast is projecting a return to 30,000
business bankruptcies in 2007—a 51% increase over 2006. This follows a
spectacular, but one-off, reduction in business failures last year, when the
number of corporate insolvencies dropped by 50% due to a 2005 change in U.S.
bankruptcy legislation.

"Businesses today are facing serious headwinds from a slowing economy and an
increase in the cost of doing business," said Euler Hermes ACI Chief Economist
Daniel North, who has said that the three most serious economic issues remain
the effects of increased energy, raw material and labor costs; the effects of
monetary policy tightening by the Federal Reserve in 2004-2006; and the
"decimated" housing market and its effects on consumers and
businesses.
Source: Euler Hermes ACI

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