After falling for at least the past three years, the number of bankruptcy filings spiked upwards in 2023, according to data released last week by the Administrative Office of the U.S. Courts. The number of non-business bankruptcy filings in 2023 totaled 434,064, up from 374,240 in 2022.
By the Numbers: The total for 2023 was the highest number of filings since 2020, when there were 522,808 non-business filings. Bankruptcy filings had been trending steadily downward for more than a decade after peaking at 1.5 million back in 2010.
- The number of Chapter 7, Chapter 11, and Chapter 13 bankruptcy filings were all higher in 2023 than in 2022 and all at their highest points in four years.
- This is the fourth straight quarter where total bankruptcy filings have risen, after a decade of consistent declines. Filings fell sharply at the outset of the COVID-19 pandemic, largely due to stimulus funds that were provided to consumers by the government.
What This Means: Experts have been expecting an uptick in bankruptcy filings for some time, given the end of pandemic stimulus payments, rising inflation, and the looming threat of a recession. Consumers’ ability to make ends meet and survive financial emergencies has been stretched to their limits and, for many of them, bankruptcy protection is their only option.
- One report cited the continued impact of medical debt on forcing consumers to file for bankruptcy protection.
- Bankruptcy filings will likely continue to increase until the Federal Reserve Board starts lowering interest rates again.
The Last Word: “When credit is cheap and easy, you tend to see fewer bankruptcies because people can simply borrow more and refinance the debts that they have,” said Brook Gotberg, a professor at Brigham Young University’s J. Reuben Clark Law School, in a published report. “When interest rates go up, when credit becomes harder to find, that’s when you start to see bankruptcies.”
