Bankruptcy

More Than 4,000 Bankruptcy Filings Per Day in March

By Bob Lawless

For the first time since the 2005 changes to the bankruptcy law (BAPCPA), the U.S. bankruptcy filing rate went above 4,000 per day in March 2008. There were 90,288 total bankruptcy filings spread over twenty-one business days in March for an average daily filing rate of 4,299 bankruptcy filings. The March 2008 filing rate is an 8.6% increase over the previous month (February 2008 with 3,969 filings per day) and a 29.4% increased compared to one year previously (March 2007 with 3,322 filings per day). As always, these statistics come courtesy of Automated Access to Court Electronic Records (AACER).

As I update the monthly filing figures each month, I always sound a cautionary note not to put too much emphasis on monthly fluctuations in bankruptcy filing data. It's the long-term trend that should concern us, and that longer view is showing an that bankruptcy filings appear to be climbing steadily. Last December, I wondered whether if the increase in the filing rate was beginning to level off, but that leveling off appears now to have been temporary. The average daily filing rate for the first quarter of 2008 (3,870) is 26.2% higher than the same period in 2007 and an 8.4% increase over the last quarter in 2007.

Looking forward, we can make some projections for the year 2008 based on these first three months. How many bankruptcy filings will we see in 2008?:

• 975,000 filings if filings continue through the rest of 2008 at the same daily rate they have averaged for the first three months of 2008
• 1,057,000 filings if filings continue through the rest of 2008 at the same daily rate they averaged in March 2008
• 1,061,000 filings if filings after March 2008 represent the same proportion of filings (about 77.3%) as the filings after March 2007 represented of the total 2007 figures

I also performed a slightly more sophisticated forecasting technique (a structural vector autoregression as explained in this post) that projects a future trend using the past data. My model accounts for historical monthly cyclicality but little else. Although past performance is no guarantee of future returns, that is essentially the technique. Using this forecasting technique, I get a projection of 1,036,000 total bankruptcies for 2008 with a 95% confidence level of between 856,000 - 1,215,000 filings.

Those are pretty much the facts. I'll leave it to the comments to help me figure out what this all means.

Full post as published by Credit Slips on April 03, 2008 (boomark / email).