Bankruptcy

Bankruptcy Filings Rising Faster Than Expected

By Bob Lawless

In March 2009, data from Automated Access to Court Electronic Records (AACER) report there were almost 131,000 total U.S. bankruptcy filings for a rate of 5,945 filings per business day. That is a 9.2% increase from February and a year-over-year increase of 38.1%. It also is a 17.0% increase from November 2008, just before the annual dip in filings during December and January.

Anyway you look at it, bankruptcy filings are rising dramatically. The 9% growth in March may not sound like much, but it is an annualized growth of 280%, meaning annual filings would almost triple if they grew 9% each month. The rate of increase also seems to be rising. It took us thirteen months to go from 3,000 filings per day to 4,000 and another nine months to go from 4,000 filings per day to 5,000. In March, we almost broke the 6,000 filings per day figure. If we go over 6,000 filings per day in April, as we appear poised to do, it will have taken only six months to break that new plateau.

With the March data, that gives us one calendar quarter of 2009 filings, and I am comfortable to start making some projections for the entire calendar year. In 2009, we will have:

• 1,326,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (5,303 per day) as they have averaged for the first three months of 2009
• 1,447,000 filings if bankruptcy filings continue at the same daily rate (5,9455 per day) as they have averaged for March
  
• 1,476,000 filings if bankruptcy filings for the remaining nine months of 2009 constitute the same proportion of total filings as the last nine months of 200 constituted for total filings that year (about 78.1%)

Those figures would represent a 22% - 32% increase in bankruptcy filings this year. My prediction of 1.4 million filings in 2009 is starting to look a little low. Indeed, if the rate of increase keeps rising, we could see 1.5 million filings, although I think a figure of 1.45 million is more likely. Of course, if the bankruptcy mortgage modification legislation passes, then filings will be much higher (easily more than 1.6 million).

The March 2009 figures have returned us almost to the level before the 2005 law became effective. When I said that the last time, a reader questioned the accuracy of the statement. The graph to the right shows the filing rate per day since 2004 (as far back as I have data). The thin red line is provided as a visual reference to compare the current filing rate to past filing rates. The spike off the top of the chart is for a data point of 31,520 filings per day in October 2005, when people rushed to file to beat the effective date of the onerous 2005 bankruptcy law.

Full post as published by Credit Slips on April 02, 2009 (boomark / email).