Huge Business Bankruptcy Filing Increase In First Quarter of 2009
The first quarter of 2009 was an ugly time economically. It saw a huge jump in business bankruptcy filings the like of which hasn’t been seen since the Great Depression.
The middle of 2008 was an ugly time economically on Wall Street. The problems roared down hill to main street in the last quarter of that year. The effects were seen in the first quarter of 2009 when business bankruptcy filings exploded. This was expected, but the sheer number of filings is still staggering. Let’s take a closer look.
The first quarter of 2009 saw business bankruptcy filings increase 64 percent compared to the first quarter of 2008. The total business bankruptcy filings were 14,319. Perhaps most troubling was the fact the vast majority of these were not reorganizations. No, a full 9,700 of them were Chapter 7 liquidations.
There are many small to medium size businesses that are being lost for no reason other than the economic downturn. That being said, there are plenty of businesses going belly up for justifiable reasons. The trend over the last two decades has been to leverage businesses to the hilt. Well, that debt has to be paid for at some point in time. Companies always just assumed business would continue to increase and they would have sufficient revenues to pay the debt off. That obviously is no longer the case!
The age of the leverage is coming to an end. Perhaps not an end, but it certainly being redefined. Companies that are debt free are surviving this Great Recession. They represent the best business model moving forward. You can be that the benefits and risks of debt will be on the front burner in many management schools from now on.