Total Bankruptcy Filings Increased 17 percent Year-over-Year in January 2024
Total bankruptcy filings were 36,607 in January 2024, a 17 percent increase from the January 2023 total of 31,176, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. January marks 18 consecutive months that total, individual, and commercial bankruptcy filings have registered monthly year-over-year increases.
Individual bankruptcy filings also increased 17 percent in January to 34,515, up from the January 2023 individual filing total of 29,448. There were 19,590 individual Chapter 7 filings in January 2024, a 25 percent increase over the 15,717 filings recorded in January 2023, and there were 14,871 individual Chapter 13 filings in January 2024, a 9 percent increase over the 13,678 filings last January.
Overall commercial bankruptcy filings rose 21 percent in January 2024, with the 2,092 filings ticking up from the 1,728 filings in January 2023. There were 460 commercial Chapter 11 filings recorded in January 2024, a 22 percent increase from the 378 commercial Chapter 11s in January 2023. Small business filings, captured as subchapter V elections within chapter 11, increased 43 percent to 176 in January 2024, up from 123 in January 2023.
As expected, the upward trend of bankruptcy filing volumes persist into the new year and we expect that trend to continue, particularly as the spring tax season concludes,” said Michael Hunter, Vice President of Epiq AACER. “High-interest rates, price fatigue, and the pandemic-era excess consumer savings depletion are all contributing factors to the increases now and into 2024.”
“Households and businesses continue to adjust to sustained high-interest rates, persistent inflation, and more stringent lending terms,” said ABI Executive Director Amy Quackenboss. “While not at the levels recorded before the pandemic, we anticipate that the steady increase in bankruptcies will continue this year.”
Adding to the challenges faced by small businesses, the debt eligibility limit of $7.5 million for businesses looking to elect subchapter V reorganization under Chapter 11 is due to sunset back to $2,725,625 in late June. ABI’s Subchapter V Task Force on Dec. 15 transmitted its “Preliminary Report of ABI’s Subchapter V Task Force on Maintaining the $7,500,000 Debt Cap for Subchapter V Eligibility” to Congress, and its findings support permanently maintaining the
eligibility limit of $7.5 million in aggregate noncontingent, liquidated debt for small businesses looking to reorganize under subchapter V. The Task Force’s Preliminary Report is the result of nine months of public hearings, roundtable discussions, and an industry survey inviting comment on subchapter V.
Total and individual bankruptcy filings increased slightly over December’s filing totals, while commercial filings decreased slightly. Total bankruptcies increased 6 percent over December’s 34,481 filings, and consumer bankruptcies edged up 7 percent over December’s total of 32,403. Individual Chapter 7 increased 5 percent, and Chapter 13 increased 9 percent, from December’s filings. Conversely, commercial chapter 11s decreased 10 percent from December’s 508 filings. Overall commercial filings increased by 1 percent from the 2,078 filings registered in December. Subchapter V elections within Chapter 11 decreased by 12 percent from the 200 filed in December 2023.
4 Foundational Accounts Receivable Collection Methods and Procedures
The foundational accounts receivable strategy tier focuses on establishing clear contracts with your clients and implementing workable systems to manage those contracts. Your contracts or written agreements should specify your terms of payment, cash-up-front or retainer stipulations, or any early payment discounts you offer to motivate clients to pay ahead of their invoice deadlines. Contracts should also stipulate parameters about starting work only after contracts or agreements are signed.
Stay organized and know where every contract is in the agreement process and the status of every invoice. Contact management systems and accounts receivable management systems can help you process, review, and access documents faster, and more easily track and status report.
Create a Process for Sending Invoices and Payment Reminders
Setting up and maintaining systems and standards is essential for mitigating your A/R risk. Make sure that invoices are sent out regularly by adhering to a repeatable process. Call customers before the invoice due dates and take steps to address non-payment the minute that a receivable becomes overdue. Sending notices of late invoices will help to highlight the issue, and the practice provides a valuable paper trail so that you are prepared if you need to escalate the matter later. Include this documentation in the onboarding of new back-office staff.
Once an invoice is 14 days past due, it’s time to reach out via an accounts receivable collections email. Make sure your email is respectful, and concise, and specifically explains that you are writing about a past-due invoice. In bullet points, summarize the details of the past-due invoice, including an invoice tracking number, the principal amount, any interest or fees, and a description of what the original balance is for — including dates and locations. Then, thank the recipient for swift payment or a call to discuss terms. Reference our accounts receivable collections letter template to help make this process easier.
Revisit and Improve Your Accounts Receivable Processes
Institute new policies to protect your business, and set a calendar reminder now to revisit your accounts receivable process a year from now. Many companies use down payments, cash-up-front terms, retainers, or milestone payments to minimize the amount they could lose.
Another option could be to keep an alternative form of payment on file such as a credit card, and include in your agreement a remedy to charge the account in the case of a missed invoice.
Secure the signatures.
Establishing a requirement that an agreement or contract is signed before products or services are provided is a key component of an effective A/R process. Remember that the terms in your contract may impact your competitive edge: if your competitors offer open terms and you require cash terms, you may lose business.
Establish a digital filing system for signed agreements to insulate your company from some (or all) receivables risk. Ensure that all contract documents are easily accessible and set your system up to receive e-signature documents as well as scans. Don’t let things live only in email.
The foundational strategy should be used as a portion of your overall A/R collection procedure. By itself, it will help show you what accounts may be overdue, and it can organize your contracts or agreements once a client is onboarded. But it alone will not help in managing your accounts receivables for better cash flow.
Create an Accounts Receivable Aging Report
One of the best ways to improve control over your accounts receivable is to create an accounts receivable aging report. This report provides a clear view of unpaid invoice balances and the length of time they are outstanding.
Typically, the accounts receivable aging report lists all clients and their outstanding invoice amounts, and sorts them by age, from current status to 1-30 days past due, 31-60 days past due, 61-90 days past due, 91-120 days past due and 120+ days past due.
Another important accounts receivable strategy is to calculate your receivables turnover ratio. This ratio shows how well you manage the credit you extend to your clients and how efficient you are at collecting payment. The higher the ratio, the better. To calculate your receivables turnover ratio for six months:
- Step 1: Add the accounts receivable total at the beginning of the six months and the end of the six months.
- Step 2: Divide that number by two to get your average accounts receivable total.
- Step 3: Divide your total sales for the six months by the average.
For example, if your company had $10,000 in receivables at the beginning of six months and $15,000 at the end of six months, and total sales for the six months of $90,000, the receivable turnover ratio would be 7.2. This means that receivables were collected about every 25 days (half a year divided by 7.2). The formula looks like this:
$90,000 ÷ (($10,000 + $15,000) ÷ 2) = 7.2
EMPLOYEE SPOTLIGHT
Seth Ingalls
Vice President of Strategic Accounts and Sales Development
What does your role consist of at GCC?
I manage day-to-day operations for a portfolio of policies while providing the highest level of service to ensure our clients’ satisfaction. I also help lead and direct the marketing and sales efforts for our producer team.
Previous education/work background
I attended Walsh College of Business and have been working for GCC/ProfitGuard for almost 12 years in numerous roles throughout that time starting initially as an intern.
What do you enjoy most about working at GCC?
The best part of my job is that each day presents a new challenge. Credit is an ever-changing market force and we are faced with new circumstances and tasks to conquer for our clients daily.
Do you have a short success story to share from working at GCC? If not, what does success mean to you at GCC?:
We had recently been working on a coverage request for a client of ours that came back unfavorably initially. After discussion and an appeal from GCC to their insurance carrier, we were able to have a limit approved based on the information that we secured from the buyer. While it took a few days to do so, the result of the insurance coverage being put in place provided a great opportunity for the client’s commercial team. We were told that what we worked out with underwriting made their commercial team’s week and let them go home on a Friday in a great mood. It’s very rewarding to know just how much we can make a difference at GCC.
What are your hobbies? How do you spend your free time?
I enjoy being active, exploring the outdoors, and spending time with my family most of all.
What’s one piece of advice you would give to someone working in this industry?
I would stress the importance of active listening. You’ll be able to offer more to clients, prospects, and colleagues than you otherwise might simply by being attentive and actively listening when others are communicating.
