Bankruptcy

Big Drop in December 2009 Filings--That's RIght, a Big Drop

By Bob Lawless

On a daily basis, December bankruptcy filings fell to 5,304. That is a 12.8% decline from November. According to Automated Access to Court Electronic Records (AACER), there were over 116,600 filings spread over the 22 business days in December. The December figures do represent a 16.2% year-over-year increase, but that is the smallest year-over-year increase since the 2005 changes to the bankruptcy law worked their way through the system. Also, the end of the year tends to see drops in the daily filing rate, as we have seen this year, and the 2009 drops are higher than in previous years. The December 2008 drop was 10.8%

The bottom line is that bankruptcy filings continue their long-term rise, but the rate of increase is slowing. The December 2009 figures are right in line with my estimated increase of 17% for all of 2010 (which would bring us to around 1.7 million total filings annually). This is hardly great news but also hardly awful news considering that the past three years have seen annual increases of around 30%. I've updated the filing trend graph in an attempt to show the long-term trend.

The Wall Street Journal reported "Personal Bankruptcy Filings Rising Fast," a sentiment echoed in many other media reports about the December 2009 bankruptcy figures. Why the discrepancy between these dramatic reports and my more measured report? First, I don't have to sell advertising space or subscriptions. Second, the total December filing figures are actually above the November figures (116,600 as compared to 115,500), but there were three more business days in December. These media reports are relying on figures from the National Bankruptcy Research Center and passed along from the American Bankruptcy Institute, neither of which adjusts for the number of days in a month. Moreover, these reports emphasize the year-over-year increases without placing them in a larger context.

Full post as published by Credit Slips on January 05, 2010 (boomark / email).