The number of businesses in the Sacramento area filing for bankruptcy has fallen over 31 percent since January of 2012. Business bankruptcy has been commonplace since the economic downturn in 2008, but it can be a good thing for businesses looking to reorganize and restructure debt, similar to the way an individual can file for bankruptcy.
From January to June in 2011, there were 29 Chapter 11 business bankruptcy filings in the Sacramento area. There were only 20 during that same span of time in 2012. There were 249 total business bankruptcy filings from January to June of last year, and only 172 filings this year. These figures are from the four county Sacramento, California area.
Personal bankruptcy filings have also dropped, falling 23 percent in 2012. Experts, however, are unsure of whether this indicates an economic upturn for the Sacramento area, or a calm period before another increase in filings. Many experts suspect that the number of filings in the past has sent people through the bankruptcy system already, and those businesses and individuals are now out of the process and back on their feet.
Business bankruptcy, as mentioned above, allows businesses to possibly stay open during times of financial difficulty. This is an especially important tool for small business owners, because even very minor financial changes can affect payments to creditors. And it doesn't take long after missing a payment to a creditor for the creditor to begin collection actions.
Chapter 11 can allow businesses to reorganize and restructure their debt. Also, the filing can stop creditor collection actions while the business is still in the bankruptcy process. This includes pending mechanics liens and repossession of business property.
Source: Sacramento Business Journal, "Sacramento bankruptcy filings decline dramatically," Kathy Robertson, July 27, 2012