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Baal-zebub · Site Admin Joined: 01 Jan 1970 Posts: 124

The statistic of bankruptcy filings might be an indicator of the value of the small business receivables. If more people and businesses are going broke, will you be able to collect money owed to you? More bankruptcy = bad news for the small business.

Or is it?

According to the Administrative Office of the United States Courts, March 24, 2006, <a href="http://www.uscourts.gov/Press_Releases/bankruptcyfilings032406.html">Bankruptcy Filings Surge in Calendar Year 2005</a>,

<blockquote>Bankruptcy filings in the federal courts skyrocketed a record 30 percent in calendar year 2005, according to data released today by the Administrative Office of the U.S. Courts.

Bankruptcies filed in the twelve-month period ending December 31, 2005, totaled 2,078,415, up from the 1,597,462 petitions filed in the 12-month period ending December 31, 2004. This was the largest number of bankruptcy petitions ever filed in any 12-month period in the history of the federal courts.</blockquote>

So who is filling?

<blockquote>The majority of bankruptcy filings are non-business filings and in CY 2005, they totaled 2,039,214, a 30 percent increase in non-business filings from the 1,563,145 bankruptcy petitions filed in CY 2004. Business filings, totaling 39,201 in CY 2005, rose 14 percent from the 34,317 business filings in CY 2004.</blockquote>

Why did bankruptcy petitions go up?

<blockquote>The increase in CY 2005 occurred largely in response to the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), as many debtors filed petitions before the law's general effective date of October 17, 2005.</blockquote>

Does this necessarily mean that the small business owner is dangerously exposed?

Perhaps not. But there is certainly more risk with the small business receivable than in the previous year. 

It is not clear if the 30% increase creates a significant trend, or if it is merely a temporary bump caused by the impending event of the law's start date.

In any event, watch your "slow pay" customers. That they don't become "no pay." 

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