In another sign of an improving economy, the number of business bankruptcies in Maryland declined for the fourth consecutive year in 2013, reaching the lowest level since pre-recession 2007, according to federal bankruptcy court figures.
Business bankruptcies dropped 12 percent last year, from 2012 to 511, and were down 44 percent from the decade-high level of 913 in 2009. Overall bankruptcies, including consumer cases, were down 6 percent last year from 2012.
That development, along with a continued increase in existing home and auto sales and the number of jobs in Maryland, should have most people feeling fairly confident about the economy and their finances, economists say.
But recent surveys show that a large majority of people still feel like they are living in a recession. That’s even though the Great Recession actually ended in mid-2009, when the nation’s gross domestic product started to rise again.
People feeling like the recession still lingers may be due in part to relatively poor employment numbers, said Daraius Irani, director of the Regional Economic Studies Institute’s applied economics and human services group at Towson University. Maryland just last year surpassed the 2.61 million jobs the state had when the recession began in December 2007, after that figured dipped below 2.5 million in early 2010.
“Some economists believe the recession made a sea change in how we view the world,” Irani said. “I don’t think it is as traumatic as after the [1930s] Great Depression. But it likely has changed the shopping habits of many people.”
Nationally, business bankruptcies dropped 24 percent last year. That decline should continue in the near future with factors like low interest rates and escalating costs to file for bankruptcy, said Samuel Gerdano, executive director of the American Bankruptcy Institute.
Star Diner in Gaithersburg’s Kentlands is among the local businesses that filed for bankruptcy last year. The restaurant filed for Chapter 11, which allows a business to continue to operate as it reorganizes and sheds debt.
Chapter 7, a more common form of bankruptcy filing, liquidates the business and distributes the non-exempt property to creditors. The business ceases operations unless continued by a trustee.
Star Diner was $262,180 in debt when it filed in November, including $180,360 owed to its landlord, according to the filing. The owner is trying to work out a payment plan.
Executives with Bethesda enriched uranium supplier USEC — one of Montgomery County’s largest companies by revenue — said the business plans to file for Chapter 11 bankruptcy protection by March 31.
In the past 11 quarters, USEC has reported net income only once. In the first nine months of 2013, losses narrowed to $87.2 million from $116.3 million in the same period of 2012.
The 84 employees at the Bethesda headquarters will not be affected by the bankruptcy filing, said Paul Jacobson, a company spokesman.
Even with fewer such businesses filing bankruptcy and the improved economic environment, a lot of businesses are sitting on cash, Irani said, though there are signs that many are spending on new capital equipment.
“Businesses are now starting to replace their capital equipment, like many consumers who now need new cars are starting to enter the market again,” Irani said.