Recovery spurs decline in bankruptcies -- Gazette.Net


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The number of business bankruptcies in Maryland fell for the third consecutive year in 2012, reaching their lowest level since pre-Great Recession 2007, according to federal bankruptcy court figures.

The trend, mirroring national data, reflects a strengthening economy, experts say.

Some 576 business entities filed for bankruptcy in Maryland courts last year, down 8 percent from 2011. It was the fewest since 2007, when there were 352 filings in the state.

The decline has cut into the business at law firms that handle a significant number of bankruptcies, such as Cohen, Baldinger & Greenfeld of Bethesda.

“Filings are down, so we are seeing fewer bankruptcy cases,” said Steven H. Greenfeld, partner at Cohen, Baldinger & Greenfeld. “That does have an effect on us.”

The firm also provides estate planning and business transaction legal services, so it is not totally reliant on bankruptcies for revenues, he said.

The dropoff in Maryland business bankruptcies was smaller than the national decline.

Nationally, business bankruptcies fell by 22 percent last year from 2011, according to Alexandria, Va., research group American Bankruptcy Institute and data firm Epiq Systems.

An improved economy and businesses being able to strike deals with creditors to borrow more money or delay payments are factors for the decline in commercial bankruptcies, lawyers and others said.

“The economy is a little better. Creditors are willing to work with people more,” Greenfeld said.

Businesses are able to bring debts, assets and cash flow into better alignment, and lending has picked up, Amy Crews Cutts, chief economist for credit bureau giant Equifax, said in a report.

“Business owners are better positioned to stay afloat,” Cutts said.

About 2 percent more businesses filed for Chapter 11 reorganizations in Maryland last year than in 2011. But fewer businesses filed for Chapter 7, which shuts down the debtor, with 422 businesses taking the liquidation route last year, down 11 percent from 2011.

Total bankruptcy filings by both individuals and businesses fell by 8.5 percent last year in Maryland to about 23,000, according to court figures. That was smaller than the 14 percent national decline.

The bankruptcy decline should continue this year, “with low interest rates, reduced consumer spending and continued deleveraging by households,” Samuel J. Gerdano, executive director of the bankruptcy institute, said in a statement.

kshay@gazette.net