Currently, the U.S. economy is experiencing a tremendous increase in the
number of businesses filing for bankruptcy as well as ceasing operations.
This recent surge in business failures is unprecedented since the Great
Depression of the 1930s.
There are quite a few endogenous and exogenous factors that may contribute
to the failure of a firm; however, many financial analysts believe that two
developments that occurred in late 1979 may have had a major impact on the
recent high rate of business failures. First, the Bankruptcy Reform Act of
1978 substantially revised U.S.
bankruptcy laws, allowing
benefits to businesses as well as consumers that they did not have prior to
the Act. Second, interest rates increased to an Unusually high level for an
unprecedented length of time.
The purpose of this Mini Brief is to provide statistical data on the
actual number of businesses that are filing for bankruptcy or ceasing
operations. Tabular data of both a historical and current nature concerning
business failures and bankruptcies is provided.
Furthermore, for your
convenience, the Congressional Research Service is now providing a new
service to congressional users, the CRS Stats Line. This new service is a
recorded message which will give the most current figures available on
business failures by calling 287-7034.
There are primarily two sources for business failure and business
bankruptcy data in the United States, Dun and Bradstreet Inc., (D&B) and the
Administrative Office of the United States Courts.
Although the Dun an&
Bradstreet data has been published since 1857 and in most respects is
considered to be more comprehensive than the Administrative Office of the
U.S. Courts data, they both have major limitations.
Dun and Bradstreet
considers business failures to be "those businesses that ceased operations
following assignments or bankruptcy; ceased With loss to creditors after such
actions as execution, foreclosure or attachment; voluntarily withdrew leaving
unpaid obligations; were involved in Court actions such as receiversnip;
reorganization, or arrangement; or voluntarily compromised with creditors out
of court." It should be noted that a major point concerning this definition
is that a loss to creditors is involved, irrespective of whether or not
bankruptcy proceedings were initiated. . Although Dun and Bradstreet data
provide breakdowns by 43 industry divisions, by State and in 25 U.S.
by five size levels of current liabilities, and by cause of failure, several
major sectors of the U.S. economy are excluded. These sectors include banks,
mortgage, loan and investment companies, insurance and real estate companies,
railroads, terminals, amusements, personal one-man services, professiqns, and
farmers. Moreover, Dun and Bradstreet does not publish failure data based on
employment size or current sales volume of firms.
Dun and Bradstreet's failure rate is based on the number of failures per
10,000 listed firms. However, those firms listed by Dun and Bradstreet
represent only about a third of the total total number of businesses in the
Office of the United States Courts has providedL
statistical data on business bankruptcies filed and pending since 1940 on an
Moreover, unpublished data has been available from this office
In comparing these data with D & B 1 s
on a quarterly basis since 1975.
statistics, i t should be noted that the Administrative Office of the U.S.
Courts does include categories of businesses which are excluded by D&B;
however, it does not include businesses which settle with creditors out s f
court. Furthermore, although the Administrative Office of the U.S.
does not provide the breakdowns by industry o r by geographic area that B&B
provides, it does provide breakdowns by type of bankruptcy and by occupations
However, according to a 1973 report published by the Commission
o n the Bankruptcy Laws of the United States, it was noted that the Bankruptcy
Division of the Administrative Office of the U.S. Courts has not established
a uniform criterion for distinguishing between a llbusinessll case and a
"nonbusiness" case. This report states that neath bankruptcy
reporting statistics to the Administrative Office makes the determinationw;
therefore, there i s a likely possibility that the Administrative Office of
the U.S. Courts' statistics may not fully reflect the incidence of small
business failures that become cases under the Bankruptcy Reform Act.
are a t least two additional major limitations present in the Administrative
Office of the U.S. Courts data.
First, these statistics are not limited to
straight bankruptcy; therefore, they tend not to indicate business failures
in a narrow sense because the Bankruptcy Code allows a number of these
businesses to reorganize in order to continue operation of the business,
Secondly, the Administrative Office data generally only applies to bankruptcy
filings; therefore, only the initial stage in the bankruptcy
Consequently, for analytical purposes Dun and Bradstreet data, although
beset by .several limitations, are considered by most analysts to be
preferable to the bankruptcy data of the Administrative Office of the U.S,
The following tables are provided to indicate the number and liabilities
of business failures; the number of joint petitions,
nonbusiness filings for bankruptcyp and the failure rate for those farms
listed by Dun and Bradstreet.
indicates the number and rate sf
business failures, a s well a s the Current liabilities of those firms which
have ceased operations from 1940-1981 according to =Dun and Bradsteet.
Liabilities a s defined by D&B and used in these tables include all accounts
and notes payable and all obligations, whether in secured form or not, known
to be held by banks, officers, affiliated companies, supplying companies or
Long-term, publicly held obligations are not included and
off-setting assets are not taken into account. Dun & Bradstreet's failure
rate is based on the number of failures per 10,000 listed firms.
Table 2 provides the most current statistics o n the number of businesses
that have failed a s well as a comparison with the same time period
previous year according to Dun and Bradstreet.
This table also indicates the
average number of failures per week a s we11 a s the average number of failures
with liabilities over $100,000 for 1981 and $982.
Table 3 provides statistical data on bankruptcy cases filed for the years
1968-1982 indicating those cases that are classified as business
nonbusiness according to the Administrative Office of the U.S. Courts.
Table 4 indicates the most current data on bankruptcy
according to the Administrative Office of the U.S. Courts broken down monthly
for 1980-1983. These data are classified as business, nonbusiness; or joint
petition cases. Joint petitions reflect a new filing provision under the
Bankruptcy Reform Act of 1978 where previously a husband and wife, or
partners in a business, would have filed separate petitions.
totals heading in this table reflects the number of joint petitions, plus the
total number of nonbusiness and business cases filed; thus the resulting
figure may be more comparable to sfatistics for cases filed under the o l d
Rate and number of business failures
Number of failures
Liability size class
Listed f i r m s
3 ,9 2 8
1940-1980 figures from Dun & Bradstreet, Inc.
Business Failure Record, 1982.
1981 data from
Dun & Bradstreet on Business Failures presented before
the ~ u b c o m m i t t e e on General Oversight, House Committee
on Small Business, June 23, 1982.
TAbLE'lB. Liabilities of business failures, 1940
(in Millions of Dollars)
Liability Size Class
TABLE 1B. (continued)
Liabilities of business failures, 1940
(in millions of dollars)
Liability size class
1940-1980 figures from Dun & Bradstreet, Ine.
1981 data from Dun & Bradstreet on Business
Failures presented before the Subcommittee on General
Oversight, House Committee on Small Business, June 23, 1982.
Current Statistics on the Number of Business Failures,
Year To Date
Average per week
Average per week
(Liabilities $100,000 or more)
Business Failures for the week
Source: Dun & Bradstreet, Inc. Economic Analysis
Department: Weekly Failure Statistics. Jan, 5, 1984.
Bankruptcy Cases Filed, 1968-1982
(for years ending June 30)
182 r 249
16 r 545
19 t 103
Administrative Office of the U.S.
Bankruptcy Cases Filed, 1981-1983
(a): Joint filings are now permitted under the new Bankruptcy
Code where previously a husband and wife, or partners in
a business would have filed separate petitions.
(b): The combined total reflects the number of joint
petitions plus the total number of non-business and
business cases filed. This may be more comparable to
statistics for cases filed under the old bankru.ptcy law.
Source: Administrative Office of the U.S. Courts,
ADDITIONAL REFERENCE SOURCES
Library of Congress. Congressional Research Service.
Business failure: a review of the concept and its significance
in the American economy. Report No. 81-195 E, by Julius Allen
and Mark Jickling. Washington, 1981. 29 p.
The Bankruptcy Reform Act of 1978 and the United States
economy: a tentative look at some interrelationships.
No. 81-145 E, by Julius Allen and Mark Jickling. Washington,
1981. 26 p.
A comparison of failure and liability trends in
manufacturing industries: implications for business assistance
policies. Report No. 81-36 E, by Nonna A. Noto and Dennis
Zimmerman. Washington, 1981. 31 p.
Federal assistance to troubled firms? An analysis of
business failure data. Report No. 88-212 E s by Nonna A, Noto
a n d Dennis Zimmerman.
Washington, 1980. 65 p.
Congress. House. Committee on Small Business. Subcommittee
on General Oversight.
Current business failure epidemic.
Hearings, 97th Congress, 26 session. Washington, U.S. Govt.
Print. Off., 1982. 218 p.