Business bankruptcies of all sizes including major corporations, and especially local small Mom and Pop Businesses are failing more and more particularly in the retail areas as the impact of on line shopping hits closer and closer to home.
The American Bankruptcy Institute indicates a 40% increase in commercial bankruptcies
from May of 2014 to May of 2017. Foreclosure generated bankruptcies for consumers are down substantially. Other debt loads have taken their place in the form of student loans, auto loans and credit card debt, etc. Added to that is the ever present medical debt, especially emergency and other unexpected hospital bills which have soared in recent years.
In all household debt now stands at nearly 13 trillion dollars, according to a recent Bloomburg report. Student loan debt now stands in excess of $1.4 billion and many are citing this as one major cause of slow growth in business and the economy generally.
Meanwhile, the government is reported to be spending $38 for each $1 dollar of student loans collected by an obviously bloated and ineffective collection strategy. Truly it would seem much cheaper just to change the bankruptcy code and allow those who can’t find employment sufficient to carry these loans in addition to the cost of living, to discharge these loans in bankruptcy.
Auto loan debt has surged 180% from the pre-crisis 2006 level, to over 1.1 trillion and credit card debt has increased 36% to almost pre crises levels in 2006.
All of this reflects the low pay jobs growth over the last 8 years which in effect has forced consumers to rely more and more on debt to make ends meet, in spite of taking on two and sometimes even three part time jobs.
In short, consumers are spent out and that translates to reduced retail and non-essential spending across the board. That is especially hard hitting to traditional brick and motor small service companies, (traditionally known as small business,) leaving little alternatives to seeking relief in Chapter 11 bankruptcy to try to salvage what’s left. It’s a matter of survival.