New data suggests Maine bankruptcies are on their way back up

The number of Mainers declaring bankruptcy has ticked up and could potentially reverse a downward streak that began in 2010.

There were 234 petitions for bankruptcy protection in Maine from January through May this year, according to federal data released last week. That number represents a 3.5% increase from the 226 bankruptcy filings in the first five months of 2022.

The slight turnaround reflects a shifting financial landscape across the country. Economists say it’s been brought on by the ripple effects of inflation, interest rate hikes and the end of pandemic-related financial assistance.

For many Maine residents and businesses, federal and state aid had staved off the brunt of the COVID-19’s economic impact.

In total last year, 534 bankruptcy applications were filed in Maine, the smallest annual number since at least 2000, according to the available data from the American Bankruptcy Institute. In 2010, the number peaked at 4,204 filings.

The historic low first surprised bankruptcy attorneys and economists, as it came during the initial financial catastrophe of the pandemic. But at the time, there were Paycheck Protection Program loans, larger unemployment benefits, emergency rental assistance and limitations on debt collection.

Many of those supports and programs have now ended. Debt collectors are back in business, inflation has been raging and the Federal Reserve has steadily increased interest rates over the last year. Sheena Bunnell, an economist and professor with the University of Maine at Farmington, said that’s probably why the state is seeing a rise in bankruptcies – even amid what she describes as a resilient economy with low unemployment rates and a robust workforce.

“If you haven’t budgeted for it, there’s this lack of equilibrium for people who can’t afford these higher costs of doing business,” she said.

Even without the cushion of pandemic help, bankruptcy rates tend to be a delayed consequence of ongoing financial hardship. After the Great Recession of 2007-09, it took Maine three years before the bankruptcy rate peaked in 2010 and then began declining.

Maine’s current bankruptcy filing rate is part of an upward trend across the United States, but so far is less acute. The number of bankruptcy filings nationwide from January to May this year increased 23% over the number for the same period in 2022, according to the American Banking Institute.

If the trend in Maine holds, the state would see 562 bankruptcy petitions in 2023. Even the slight increase would make it the first year since 2010 that more Maine businesses and individuals sought bankruptcy protection than in the previous year.

However, it’s impossible to predict with certainty whether the uptick will continue – or if it’s just a blip on Maine’s economic radar, said Jeffrey Piampiano. He’s an attorney at Portland law firm Drummond Woodsum and a trustee for certain types of bankruptcy cases.

“We’ve reached such a low point last year that a small increase could be just an outlier,” Bunnell said. “But if the trends continue, that’s something to watch.”