Bankruptcy

Foreclosures and More Bankruptcy Filings

By Bob Lawless

It is popular to assume the increases in the bankruptcy filing rate are tied to the home mortgage foreclosure crisis here in the United States. Is that really the case? I've checked the data, and it appears that it is.

The map to the right looks at individual federal judicial districts to show the increase in the average daily bankruptcy filing rate from the first four months of 2007 as compared to the first four months of 2008. I used a four-month average of data so that the results were not affected by any one month. The map shows all federal judicial districts where bankruptcy filings increased more than 20%. As always, the bankruptcy filing data are from our good and reliable friends at Automated Access to Court Electronic Records ("AACER"). Yeah, I know the map is hard to read, but clicking on the map should give you a pop-up window with a much bigger version. If that doesn't work, squinting is always an option, but you don't need to squint much to see the big patterns.

There are big increases in all four California judicial districts, with the eastern and central districts in that state showing increases over 80%. Nevada, Florida, Virginia, and Maryland all show large increases. Compare my map on bankruptcy filings to the map of foreclosure rates available from RealtyTrac, an online marketplace for foreclosure properties and a provider of data on foreclosure activity. The two maps show a similar pattern, although one must keep in mind the RealtyTrac map is a snapshot of foreclosure activity in the first quarter of 2008 rather than a comparison of 2008 to 2007.

A recent press release from RealtyTrac states California, Nevada, Arizona, and Florida posted the top foreclosure rates. All of these states have seen bankruptcy filings rise by more than 50%. The table provides the data underlying the bankruptcy filing rate map. (Again, clicking on the table will bring up a slightly larger and more readable version.) Another bankruptcy filing hot spot is the Eastern District of Virginia and the District of Maryland, matching RealtyTrac's map shows the D.C. area as another locale suffering a high foreclosure rate. Similarly, the relatively high increases in bankruptcy filings in Connecticut and Rhode Island seem to match up with RealtyTrac data.

There are some exceptions. Most obviously, the bankruptcy filing rates in Georgia have not increased dramatically from the first four months of 2007 as compared to the first four months of 2008. At the same time, RealtyTrac shows reports Georgia as having the fifth highest foreclosure rate in the first quarter of 2007 and a whopping 80% increase in foreclosure activity from the same time in the previous year. I do not have a good explanation of why Georgia would not fit the pattern of increased bankruptcy rates going hand in hand with increased foreclosure rates. Is there some novelty to Georgia foreclosure law that makes a federal bankruptcy filing less attractive as an option to save a home?

Full post as published by Credit Slips on May 21, 2008 (boomark / email).