Company Bankruptcies in U.S. Outpace Individual Filings in June

By Bill Rochelle and Timothy R. Homan

July 2 (Bloomberg) -- The softening economy and the collapse of the housing market caused U.S. businesses to file for bankruptcy protection at a higher annualized rate than individuals, according to data compiled from June court records.

Bankruptcy filings in the U.S. during the month rose 33 percent from a year earlier and may surpass 1 million in a year for the first time since bankruptcy laws were tightened in October 2005.

Individuals this year have filed at an annualized rate that is 23 percent above 2007, while total commercial bankruptcies rose 34 percent, data compiled by Jupiter eSources LLC in Oklahoma City show.

Companies filing for Chapter 11 reorganization also rose at an annual rate of 34 percent above the 6,241 filings in 2007.

The Labor Department tomorrow may report that payrolls fell for a sixth straight month in June, according to a Bloomberg News survey. The U.S. lost 49,000 jobs in May, when the unemployment rate increased by half a point to 5.5 percent, the biggest jump in the jobless rate in more than two decades.

The U.S. economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. The revised figure, up from 0.9 percent released in May, caps the weakest six months of growth in five years.

The Federal Reserve last month said it foresees slow growth into 2009. ``Tight credit conditions, the ongoing housing contraction and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' the Federal Open Market Committee said in a statement.

513,000 Filings This Year

Bankruptcy courts had almost 513,000 new filings in the first six months of 2008, according to Jupiter's Automated Access to Court Electronic Records service. Filings began the year above 70,000 in January and rose above 90,000 by March. Monthly filings have hovered around 90,000 since then.

Rising fuel prices and weaker demand were reasons for last month's Chapter 11 filing in U.S. Bankruptcy Court in Delaware by JHT Holdings Inc., the biggest U.S. transporter of large trucks from manufacturing plants to dealers. Retrenching consumers hurt Whitehall Jewelers Inc., a 373-store jewelry retailer that will liquidate after seeking refuge last month, also in Delaware.

Soaring costs can affect companies even with wealthy owners like Kenosha, Wisconsin-based JHT, which was acquired in January 2006 by institutional investors including affiliates of Goldman, Sachs & Co., D.B. Zwirn Special Opportunities Fund LP, Spectrum Investment Partners LP, and Stonehouse Investment Co.

Filings fell sharply in late 2005 and early 2006 after consumers jammed the courts in advance of changes in bankruptcy law effective October 2005 that made it harder for people to erase debt.

In the two weeks before the new law, 630,000 Americans sought bankruptcy protection, bringing total filings in 2005 to a record 2.1 million. There were 590,500 filings in 2006 and 827,000 in 2007.

To contact the reporters on this story: Bill Rochelle in New York at wrochelle@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net.

Last Updated: July 2, 2008 14:01 EDT

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