Bankruptcy

Bankruptcies Continue Their Slow, Upward Pace

By Bob Lawless

We ended the year 2007 with 826,665 total bankruptcy filings, according to the data from Automated Access to Court Electronic Records (AACER). This figure represents a 39.9% increase over 2006, but the 2006 figures were affected by the huge surge of filings October 2005 to beat the effective date of the new bankruptcy law. The 2005 surge created a trough in demand for bankruptcy filings that continued into the first part of 2006.

What we can say is that bankruptcy filings appear that they will continue their upward trend since the 2005 law's enactment. For example, in December 2007 and January 2008, total bankruptcy filings per filing day were both about 3,300 as compared to around 2,700 for the same period a year ago. As I wrote a few months ago, I think the rate of increase in bankruptcy filing rates has been leveling off, but overall it's still an upward trend. The trend line alone suggests that there it looks like there will be more than 1,000,000 bankruptcy filings in 2008. Tightening credit markets mean both consumers and business will have much less ability to use further borrowing as a way to stave off the day of financial reckoning. Thus, I think the conditions are right for the United States to continue to see rising bankruptcy rates and again go over 1,000,000 total annual filings.

Full post as published by Credit Slips on February 06, 2008 (boomark / email).