Why Are Bankruptcies on the Rise in the U.S.? Attorneys, Accountants, Investment Bankers (2010)
Bankruptcy in the United States is governed under the
United States Constitution (
Article 1,
Section 8, Clause 4) which authorizes
Congress to enact "uniform
Laws on the subject of Bankruptcies throughout the
United States." Congress has exercised this authority several times since 1801, most recently by adopting the
Bankruptcy Reform Act of 1978, as amended, codified in
Title 11 of the
United States Code and commonly referred to as the "
Bankruptcy Code" ("
Code").
The Code has been amended several times since, with the most significant recent changes enacted in
2005 through the Bankruptcy
Abuse Prevention and
Consumer Protection Act of 2005 (
BAPCPA). Some law relevant to bankruptcy is found in other parts of the United States Code. For example, bankruptcy crimes are found in
Title 18 of the United States Code (
Crimes). Tax implications of bankruptcy are found in
Title 26 of the United States Code (
Internal Revenue Code), and the creation and jurisdiction of bankruptcy courts are found in Title 28 of the United States Code (
Judiciary and
Judicial procedure).
While bankruptcy cases are filed in
United States Bankruptcy Court (units of the
United States District Courts), and federal law governs procedure in bankruptcy cases, state laws are often applied when determining property rights. For example, law governing the validity of liens or rules protecting certain property from creditors (known as exemptions), may derive from state law or federal law. Because state law plays a major role in many bankruptcy cases, it is often unwise to generalize some bankruptcy issues across state lines.
In 2008, there were 1,
117,771 bankruptcy filings in the
United States courts. Of those, 744,424 were chapter 7 bankruptcies, while 362,762 were chapter 13.
Personal bankruptcies may be caused by a number of factors. In 2008, over 96% of all bankruptcy filings were non-business filings, and of those, approximately two-thirds were chapter 7 cases.
Although the individual causes of bankruptcy are complex and multifaceted, the majority of personal bankruptcies involve substantial medical bills. Personal bankruptcies are typically filed under
Chapter 7 or
Chapter 13. Personal
Chapter 11 bankruptcies are relatively rare.
The American Journal of Medicine says over
3 out of 5 personal bankruptcies are due to medical debt.
The largest bankruptcy in
U.S. history occurred on
September 15, 2008, when
Lehman Brothers Holdings Inc. filed for
Chapter 11 protection with more than
USD$639 billion in assets.[58]
The 20 largest corporate bankruptcies are as follows:[59]
Company Bankruptcy
Date Total Assets Pre-Bankruptcy
Description
Lehman Brothers Holdings, Inc. 9/15/2008 $691,063,
000,000
Investment Bank
Washington Mutual 9/26/2008 $327,913,000,000 Savings & Loan
Holding Co.
Worldcom, Inc. 7/21/
2002 $103,914,000,000 Telecommunications
General Motors 6/1/2009 $82,290,000,000 Manufactures & Sells
Cars
CIT Group 11/1/2009 $71,000,000,000 Banking
Holding Company
Enron Corp. 12/02/
2001 $65,
503,000,000
Energy Trading,
Natural Gas
Conseco, Inc. 12/17/2002 $61,
392,000,000
Financial Services Holding Co.
MF
Global 11/08/
2011 $41,000,000,000
Financial Derivatives Broker
Chrysler 4/30/2009 $39,
300,000,000 Manufactures & Sells Cars
Thornburg Mortgage 5/01/2009 $36,521,000,000
Residential Mortgage Lending Company
Pacific Gas and Electric Co. 4/06/2001 $36,
152,000,000
Electricity & Natural Gas
Texaco 4/12/
1987 $34,940,000,000 Petroleum & Petrochemicals
Financial Corp of
America 9/09/
1988 $33,864,000,000 Financial Services & Savings and Loans
Refco
10/17/2005 $33,
333,000,000
Brokerage Services
IndyMac Bancorp 7/31/2008 $32,734,000,000
Bank Holding Company
Global Crossing 1/28/2002 $30,185,000,000 Global telecommunications
Carrier
Bank of New England 1/07/
1991 $29,773,000,000
Interstate Bank Holding Company
General Growth Properties 4/16/2009 $29,557,000,000
Real Estate Investment Company
Lyondell Chemical 1/06/2009 $27,392,000,000 Global Manufacturer of
Chemicals
Calpine 12/20/2005 $27,216,000,000
Integrated Power Company
http://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States