Bankruptcy

Bankruptcy Filings Drop in April

By Bob Lawless

The daily bankruptcy filing rate in April was 6,631, which was a 4.2% decline from March. The April filing rate was 13.2% higher on a year-over-year basis, but that is the lowest year-over-year increase since the trough after the 2005 changes to the bankruptcy law. As always, a thank you goes to Automated Access to Court Electronic Records (AACER) for supplying the data.

Before we get carried away with what looks like really good news, it is important to keep a few points in perspective. First, April has tended to see declines in the bankruptcy filing rate (see the table to the right). It's all part of the annual cycle of bankruptcy filings. Because February and (especially) March tend to have inflated filing rates as people use their tax refunds to pay for bankruptcy court costs and attorneys fees, April tends to see a decline as the filing rate moves back toward its mean. Second, the monthly bankruptcy filing rates do what a lot of data series do--that is, they move up and down. It's probably not profitable to draw conclusions from one month's worth of bankruptcy data. Indeed, it has only been a few years since information technology made reporting of monthly bankruptcy filing figures easy to do. Before then, we generally only looked at quarterly data. Third, as I'll explore later, there is a great deal of regional variation. Some parts of the country, especially in the west, are still seeing increasing filing rates.

Looking into the crystal ball, I'm still holding onto my prediction of between 1.65 and 1.70 million bankruptcy filings in calendar year 2010, which would represent a per capita filing rate close to the same as it was before the 2005 changes to the bankruptcy law. Specifically, 2010 calendar year bankruptcy filings will be:

• 1,596,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (6,334 per day) as they have averaged for the first four months of 2010 (This estimate is almost certainly too low for an annual projection given the low January 2010 figure.)
  
• 1,646,000 filings if bankruptcy filings continue for the same daily rate (6,631 per day) as they have averaged for March 2010
• 1,677,000 filings if bankruptcy filings for the remaining eight months of 2010 constitute the same proportion of total filings as the last eight months of 2009 constituted for total filings that year (about 68.7%)

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