208 posts categorized "Bankruptcy Data"

Annual U.S. Bankruptcy Filings on Track for 6.7% Decline

posted by Bob Lawless

Filings per 1000.July 2008 to June 2016It has been a while since I last checked in on bankruptcy filing rates. The arrival of the latest figures from Epiq Systems was a welcome reminder to do so.

We are at the halfway point for the year, and the U.S. has had 398,000 bankruptcy filings. It is tempting to simply double that figure to get an estimate of what filings will total for all of 2016, but that estimate would be too high. Bankruptcy filings are somewhat more concentrated in the first six months of the calendar, which have accounted for about 52% of yearly filings for the past two years. Extrapolating from recent experience would mean there will be 764,000 filings for the calendar year.

That would be a 6.7% decline in filings from 2015. Back in January, I forecasted a 5% decline or 780,000 filings for 2016. Given that we are well within the confidence interval of that estimate, I will take that. Although we still have half the year left to go, the model I use for the forecasting looks to be holding up.

In terms of trends, we have had 68 straight months of year-over-year declines in the daily filing rate. The annualized filing rate per 1,000 currently stands at 2.46. The graph shows a 12-month moving average for filings per 1,000 persons since 2008. The discerning eye will note the tail of the graph is flattening. The year-over-year decline is slowing. Where we saw double-digit declines in 2013-14, the declines are in the 5%-8% figures now.

Continue reading "Annual U.S. Bankruptcy Filings on Track for 6.7% Decline" »

2016 Bankruptcy Forecast -- Let's Say 780,000

posted by Bob Lawless

Forecasting U.S. bankruptcy filings for this year was a little more complicated. In a comment to my post about the total 2015 bankruptcy filings, Erich Fabricius made the astute observation that December 2016 saw the introduction of new bankruptcy forms and that could explain my befuddlement at the abnormally large 14.8% decline for December in terms of year-over-year daily filing rates. November, in contrast, saw almost no decline in the year-over-year rate, which is also unusual. The relatively stronger numbers in November suggests that attorneys were perhaps trying to beat the deadline before the new forms went into effect. The effect would not have to be huge -- shifting 5,000 filings from December into November would have been enough to create this effect.

What that means is my preferred mathematical model to predict bankruptcy filings for the next year has to start with the immediately previous two months being untypical months. If I run the model with the actual data, I get 800,000 filings. If I "correct" the numbers for November and December to what would have been expected had recent monthly trends continued, the model predicts 782,000 filings. The model controls for the amount of outstanding consumer credit and national personal income and has proven accurate in the past

Continue reading "2016 Bankruptcy Forecast -- Let's Say 780,000" »

Bankruptcy Filings Drop 10% in 2015

posted by Bob Lawless

2015 Calendar Year FilingsAccording to the latest figures from Epiq Systems, total U.S. bankruptcy filings dropped 10% in 2015. The yearly total was 819,240 compared to 910,090 the previous year. As bankruptcy experts know, these figures are low. In 2015, there were 2.55 bankruptcy petitions per 1,000 persons, the lowest figure since 1989, ignoring the statistical gyrations around the 2005 bankruptcy law. If the decline keeps up, we won't even have to ignore the 2005-06 statistical gyrations for the statement to be true.

Last January, when forecasting the number of 2015 filings, I wrote, "a good estimate for 2015 bankruptcy filings is 800,000." That turned out to be not too bad of a forecast, off by only 2,5%. As the model I used seems to have been a good prediction, I will try it again and post the results here on Credit Slips.

Before I go off to crunch numbers, one other thing caught my eye in the latest numbers. The daily filing rate for December was only 2,446, which was a year-over-year decline of 14.8%. The decline in U.S. bankruptcy filings had been slowing, and I was expecting the decline to eventually flatten out. December is an unusually slow month for bankruptcy filings, but it is an unusually slow month every year. I am always cautious about extrapolating too much from one month of data, but the size of the decline in December took me by surprise. 

Servicers Serve the Interests of the Lender, NOT the Student Loan Borrower

posted by david lander

I have enormous respect and appreciation for the CFPB and the wonderful and talented and committed folks who work there. Thus I am mystified that in their efforts to improve servicing of student loans and directing of student loan at-risk borrowers to the window that would help them, they continue to misunderstand the basic nature of capitalism and its profit motive and the borrower-lender relationship. Certainly, the fatally flawed structuring of the credit counseling industry by the credit card lenders in the 1970’s and the still ongoing dismal efforts of mortgage loan servicers to “help” borrowers in default should have taught us the lessons that those who serve the lender cannot and may not and will not serve the interests of the borrower. Capitalism does not work that way whether the lender is a traditional profit incented financial institution in the case of credit card and mortgage loans or a mix of private and public lenders as in the case of student loans. Think IRS and SBA for other government collector examples. If the notion of inclusive capitalism or Robert Reich’s notion of saved capitalism takes hold, perhaps it will invent a way for this to work, but today such efforts are poisonous because they delay creative solutions and punish borrowers and the American economy both of which desperately need such solutions to thrive. Of course servicing must be improved as much as possible and it is tempting to try to rely on the servicers since they are the ones with contacts with the borrowers, but servicers are collectors by another name. It is well past time to stop putting our faith in the collectors. There is currently no high quality network of financial counselors who can help student loan borrowers at risk.All of us including the Department of Education and the CFPB need to start work immediately to develop that effective network and make certain that this crucial job is not delegated to mediocre providers without sufficient quality or quality controls. More on that in a later post.

Who "Presides" over Chapter 13 Plan Confirmation Hearings?

posted by Melissa Jacoby

Shutterstock_329900393Temple Law Review will soon publish a volume honoring Bill Whitford, based on a conference from last fall. That event was particularly special for an additional reason: it turned out to be the last opportunity, for many of us, to spend time with another inspiring leader in our field, Jean Braucher

My own short contribution, on judicial oversight in chapter 13 bankruptcies, has just been posted here. We will share the word when the entire volume is available - including, I believe, a piece from Jean.

Gavel image courtesy of Shutterstock

Municipal Bankruptcy After Detroit

posted by Melissa Jacoby

ArrowsA new commentary stemming from my draft article Federalism Form and Function in the Detroit Bankruptcy is now posted on the Columbia Law School Blue Sky Blog. The post frames the current skirmishes over other municipalities' access to chapter 9 at least in part as a referendum on the procedural tools used by the court to supervise the Detroit bankruptcy. For two prior Credit Slips posts on the article, see here and here.

Arrow image courtesy of Shutterstock.com

Yep, 800,000 Bankruptcy Filings This Year

posted by Bob Lawless

My blogging has been light the past few months as we have been working on the eighth edition of what will now be LoPucki, Warren & Lawless, Secured Transactions: A Systems Approach. For you secured transactions teachers out there, we have returned a first set of page proofs and everything looks on track for publication later this year well in advance of the spring semester.

To get back into the blogging swing of things, I go to where else . . . bankruptcy filing data. Back in January, I predicted that total 2015 bankruptcy filings for the U.S. would be "somewhere around 800,000." Revisiting that prediction, the numbers seem right on track to meet it.

Continue reading "Yep, 800,000 Bankruptcy Filings This Year" »

Quantifying the Benefits of the Fresh Start

posted by Jason Kilborn

I recently discovered a not-so-new paper that provides a useful answer to a question I've asked before:  Who benefits from consumer bankruptcy, and to what degree? This is a real challenge for policy-making, and well-supported answers are essential to greasing the wheels of reform.

In this paper, Will Dobbie (Princeton) and Jae Song (SSA) use a creative technique, comparing the financial outcomes of Chapter 13 debtors whose plans were--and were not--confirmed to probe the positive effects of access to such relief (apparently whether or not the payment plan is successfully completed). Successful access to Chapter 13 protection led to over $5000 in increased annual earnings in the first ten post-filing years and a 3.5 percentage-point increase in employment over the first five post-filing years, including a nearly 3 percentage-point increase in self employment. Access to relief also reduced the receipt of "welfare" benefits and increased retirement savings contributions.  Most striking, access to debt relief reduced mortality (presumably by decreasing stress) during this period by almost 2 percentage points--which is a 47.5% decrease from the mean for filers whose cases were dismissed, largely attributable to a large, positive effect on filers over 60. The authors attribute these gains to an increased incentive to work and produce earnings and  reduction in economic instability and stress.

The results of this study are among the many individual and societal benefits of consumer bankruptcy commonly identified in legal literature. Indeed, the authors conclude that "individual debt relief is much more likely to be welfare-improving than previously realized"--and these instances of individual welfare redound in direct ways to the state and society as a whole. While I can see a variety of quibbles that empirical scholars might have with this study, the results provide fairly solid support for the most common working theories of relief, and they offer even greater comfort for policymakers searching for reasons to introduce or expand individual debt relief.

Bankruptcy Filings Down Again 10.1% in February 2015

posted by Bob Lawless

2015 February.Year over Year ChangesThanks to Epiq Systems, the latest monthly bankruptcy figures are out, and they show a 10.1% year-over-year decline. We now have had 52 straight months of year-over-year declines in the U.S. bankruptcy filing rate. The graph to the right shows the trend in year-over-year changes.

There was a daily average of 3,422 bankruptcy filings in February, compared to 3,804 from the previous year. Total February bankruptcy filings were just over 65,000. (Daily averages are computed based on business days.)

I forecasted approximately 800,000 bankruptcy filings for the 2015 calendar year, and the first two months of the calendar year suggested we are spot on that forecast. The first few months of the calendar historically see the highest filing rates of the year. January and February usually account for about 15.5% of the annual total, and extrapolating that historical pattern to the 124,052 filings so far in 2015 puts us right at 800.000 for the calendar year.

(For new readers, reasons for the decline are explained in many of my posts collected here.)

Sh*t In, Sh*t Out? the Problem of Mortgage Data Corruption & Empirical Analysis

posted by Adam Levitin

Empirical economic analysis is a powerful tool. It can elucidate correlations and sometimes even get us to causual explanations. But it has a serious weak-spot:  its value is entirely dependent upon the integrity of the data analyzed. To put the problem succinctly: sh*t in, sh*t out.

This brings us to analyses of the housing bubble. There's a sizeable academic literature on the housing bubble (and relatedly also expert witness reports on loss causation in MBS litigation) that rely on loan-level data. The problem is that a lot of that loan-level data is suspect. That should hardly be a surprise: the industry even referred to some products as "liar loans". And there were also FBI Mortgage Fraud reports indicating an uptick in mortgage fraud. But it was easy for economists to ignore the data integrity problem as long as the problems were merely anecdotal (e.g., the mariachi musician with the six-figure income), and could be blissfully assumed to only affect a small number of loans.

No longer. It's hard to show mortgage fraud empirically, but there's a growing empirical literature about mortgage fraud. There are now a couple of academic studies demonstrating significant inflation of borrower income on loan applications (here and here and here and here and here). (To be clear, this does not mean that the income was inflated by the borrowers. It could be inflated by either borrowers or lenders, including loan brokers.) There's also a Fitch Ratings report from late 2007 that shows questionable stated income, employment, FICO scores, property occupancy status, and appraisals on a large percentage of a small sample of subprime loans. 

I want to emphasize that this literature does not undermine all empirical work on the housing market during the bubble years. But it should give us pause when considering any analysis that relies on either loan-level or pool-level loan characteristics such as income, DTI, FICO, occupancy status, and LTV/CLTV. I suspect that the empirical mortgage fraud literature will not deter many economists from plowing ahead whenever their data produces a regression with statistical significance. And the studies might well be right in the end. But it should tell the rest of us to consume the studies with a grain of salt.

Rethinking “Small” Business Bankruptcies

posted by Michelle Harner

Shutterstock_228943780It may surprise some, but approximately 90% of all chapter 11 debtors have less than $10 million in assets or liabilities, less than $10 million in annual revenues, and 50 or fewer employees (see data on small and medium-sized enterprises (SMEs) in the ABI Commission Report, here). These companies are the heart of chapter 11. Nevertheless, most of the media and caselaw coverage discusses only the megacases—e.g., Caesars, American Airlines, Tribune Company, etc.—representing approximately 2-3% of chapter 11 debtors. It is time to change the focus of the conversation.

When a small business closes its doors, an entire community feels the impact. Consider the following description of the ripple effects of the closing of a small mine in Lincoln County, Montana:

In addition to the workers and families directly impacted by the loss of jobs, the ripple effects of the loss of that income will impact local businesses at every level. Restaurants, stores and other shops depend upon local consumers to keep themselves afloat, the dollars that are paid to those employees find their way into the hands of a number of additional places, keeping a small local economy alive.  (Full story here.)

Similar stories occur most everyday in towns across America (see, e.g., here).

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Have Retail Reorgs Gone the Way of the Dodo?

posted by Michelle Harner

Shutterstock_157426502-3In the past two months, four retailers have filed bankruptcy cases. RadioShack is rumored to be preparing a chapter 11 filing, and other retailers certainly appear to be struggling (see Stephen Lubben’s post here). But if you were counseling any of these retailers, would you recommend a chapter 11 filing? Okay, put aside the professional fees you might earn—would filing really be in the best interests of your retail client? (For a discussion of fees and costs in chapter 11, see Part IV.A.8 of the ABI Commission Report.)

Consider this: from 2006-2013, the number of retailers liquidating in chapter 11 increased significantly. Although no data are perfect, the various data we have on chapter 11 filings are quite telling. For example, according to the UCLA-LoPucki Bankruptcy Research database, during 2006-2013, 41.2% of large public retailers (excluding eating and drinking places) emerged from chapter 11 and 58.8% liquidated while, during 1980-2005, 60.5% of large public retailers emerged from chapter 11 and only 39.5% liquidated. Likewise, a quick look at the New Generations Public and Major Private Companies database suggests a similar trend for 2006-2013: approximately 62% of retail cases in the database ended in a liquidation (36 of 58). A chapter 11 filing has, quite literally, become a “bet the company” decision for retailers.

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Bankruptcies Down 12% in 2014, Forecast Predicts the Same Decline for 2015

posted by Bob Lawless

2015 Projected Filings from JanuaryThe final count for 2014 U.S. bankruptcy filings is in, thanks to the data from the ever-helpful Epiq Systems. There was a total of 910,090 total bankruptcies in 2014, a decline of 11.8% from the previous year.

In early June, my prediction was for 2014 bankruptcies to be "just over 900,000," a solid prediction but with half the data already in the books.

My prediction for 2015 bankruptcies is somewhere around 800,000, which would be another decline of 12%. I arrived at that figure in two ways.

Continue reading "Bankruptcies Down 12% in 2014, Forecast Predicts the Same Decline for 2015 " »

Bankruptcy Filings Are Low, But Not Everywhere

posted by Bob Lawless

Filings by Judicial District.Sept 2014Bankruptcy filings have dipped to their lowest rate since 1990, as previously blogged (ignoring anomalous statistical gyrations around the 2005 changes to the bankruptcy law). Over the past twelve months the bankruptcy filing rate per 1,000 persons has been 2.95, which is the first time it has been below 3.0 in almost 25 years. But, the filing rate is not that low everywhere.

Before discussing how the filing rates are different across the country, the usual question I get is why the bankruptcy filing rate has declined so much. The answer to that question is not this post. Rather, see many previous posts like here and here. The short version is that U.S. households are carrying less debt -- nothing more complicated than that. Along those lines see the post at Calculated Risk about the Fed's household debt service ratio being near record lows.

Continue reading "Bankruptcy Filings Are Low, But Not Everywhere" »

Bankruptcy Filings Will Be the Lowest Since 1995 -- Here Is a Reason Why

posted by Bob Lawless

2014 Projected Filings from AugustIn June, I said we are on track for just over 900,000 bankruptcy filings for 2014. The latest data are in from Epiq Systems, and that 900,000 figure remains the best estimate for the calendar year. We have had 556,875 total bankruptcy filings this year, and in 2012 and 2013, the last five months added 39.5% more filings. That gives an estimate of abut 907,000 filings for 2014.

Year-over-year declines remain large. There were 77,489 total bankruptcy filings in July or 3,521 filings per business day, a 11.7% decline from the previous year.

As the chart shows, the number of bankruptcy filings will be the lowest in the last seventeen years -- indeed the lowest since 1995. Those of you paying attention at home might point out that 2006 and 2007 appear to be lower, but these were the years around the passage of the 2005 bankruptcy amendments. If we average 2005 - 2007 for a more accurate picture, there were 1.1 million filings per year.

Continue reading "Bankruptcy Filings Will Be the Lowest Since 1995 -- Here Is a Reason Why" »

"Don't give me so much that you've given me nothing" - Remembering M. Caldwell Butler's Contribution to Bankruptcy Law

posted by Melissa Jacoby

Former Virginia Congressman M. Caldwell Butler died last week. He is widely known for his role in the Nixon impeachment proceedings, his efforts to limit extensions of the Voting Rights Act, and his support for ensuring legal representation for low-income individuals. But Congressman Butler is also a major figure in the history of bankruptcy law. He was a principal co-sponsor of the Bankruptcy Reform Act of 1978 that serves as the foundation of the modern bankruptcy system. Professor and lawyer Kenneth N. Klee worked closely with Congressman Butler on the House Judiciary Committee in the 1970s. I asked Professor Klee to share a few words of remembrance with us, which I repeat in their entirety here:

I first met M. Caldwell Butler in 1975 when he became the Ranking Minority Member of the Subcommittee on Civil and Constitutional Rights of the House Judiciary Committee. Caldwell was most interested in the Voting Rights Act legislation and finding a way for the South to get out from under the Act. In his view, Washington was improperly interfering with the sovereignty of the southern states based on predicate acts that had long since ceased to serve as a basis for federal control. He asked me to draft a series of amendments that would permit the South to extricate itself from the Voting Rights Act. The requirements to regain sovereignty were quite demanding, to the point that the amendments became known as the "impossible bailout."  Nevertheless, the amendments did not come close to passing. It was evident that there were no circumstances under which the majority in Congress wanted to let the southern states out from the Voting Rights Act.

Caldwell assumed his responsibilities over bankruptcy legislation with diligence and good cheer. His fabulous sense of humor carried us through many long markup sessions during which the members of the Subcommittee read the bankruptcy legislation line by line. He had a sharp legal mind and deep curiosity. He also was very practical and to the point. He was fond of telling me "don't give me so much that you've given me nothing."

It was a privilege and honor to work with him. The bankruptcy community should join in paying him tribute.

                        -- Ken Klee

Congressman Butler made another round of contributions to bankruptcy reform in the 1990s. The fact that they are not all reflected in today's Bankruptcy Code makes this story more pressing, not less. Well over a decade after he had returned to the practice of law in Virginia, Congressman Butler was appointed to the National Bankruptcy Review Commission, for which I was a staff attorney. Expressing satisfaction with the 1978 Code, the House Judiciary Committee directed this Bankruptcy Commission to focus, for two years, on "reviewing, improving, and updating the Code in ways which do not disturb the fundamental tenets of current law."  Not one to leave the heavy lifting to others, even in a pro bono post, Congressman Butler stepped up to the challenge of forging a compromise, among those with diverging politics and views, to improve the consumer bankruptcy system.

Continue reading ""Don't give me so much that you've given me nothing" - Remembering M. Caldwell Butler's Contribution to Bankruptcy Law" »

900,000 Bankruptcy Filings This Year, Maybe

posted by Bob Lawless

Monthly Filing Trends 2004 to 2014Bankruptcy filings have continued to decline in the first part of 2014. This decline is part of a longer-term trend as the graph shows. (Clicking on the graph will bring up a larger version in a pop-up box.)  As always, thank you to Epiq Systems for providing the data.

The May 2014 daily bankruptcy filing rate was 4,079, which was a 7.0% decline on a year-over-year basis. There have been just over 405,500 in the first five months of 2014. For the past three years, filings for the first January - May have been approximately 44.5% of the yearly total. Extrapolating, we therefore can expect just over 900,000 bankruptcies for the entire calendar year.

The annual filing rate is now 3.08 bankruptcies per 1,000 persons. The last time bankruptcy filings were this low was 1990. (if we ignore the anomalous statistical gyrations around the 2005 bankruptcy law).

With these latest numbers, the year-over-year bankruptcy filing rate has declined for forty-three straight months. The only indication this decline might stop is that the May 2014 year-over-year decline of 7.0% was the smallest decline since April 2011 when the decline was also 7.0%.

Working and Living in the Shadow of Economic Fragility

posted by Melissa Jacoby

OupbookCredit Slips readers, please note the publication of a new book edited by Marion Crain and Michael Sherraden. The New America Foundation is hosting an event on the book tomorrow, Wednesday, May 28, 2014 at 12:15 EST. Not in Washington, D.C.? The event will be webcast live

The book project developed out of a stimulating multi-disciplinary conference at Washington University in St. Louis. Participants had great interest in considering how bankruptcy scholarship fits within the larger universe of research on financial insecurity and inequality. My chapter with Mirya Holman synthesizes the literature on medical problems among bankruptcy filers and presents new results from the 2007 Consumer Bankruptcy Project on coping mechanisms for medical bills, looking more closely at the one in four respondents who reported accepting a payment plan from a medical provider. Not surprisingly, these filers are far more likely than most others to bring identifiable medical debt, and therefore their medical providers, into their bankruptcy cases. We examine how payment plan users employ strategies - including but not limited to fringe and informal borrowing - to manage financial distress before resorting to bankruptcy, and (quite briefly) speculate on the future of medical-related financial distress in an Affordable Care Act world.

Cui bono?

posted by Jason Kilborn

At a conference on consumer bankruptcy policy over the weekend in Athens, Greece (a place that knows all too well about consumer financial distress) and again today in class, I confronted a really nagging, fundamental problem of bankruptcy policy: For whose benefit do modern societies develop consumer bankruptcy laws, and do these systems actually deliver such benefits? In my view, the most convincing and common explanation for why existing systems offer debt relief to consumers is that relieving their suffering redounds to the greater benefit of society at large (see, e.g., section I.9, pp. 26-40, in the World Bank's Report). The problem is that I know of no empirical proof of this essential assertion. Indeed, to the contrary, I have seen well done empirical evaluations of the fresh start that suggest that, at least in the US bankruptcy system, many consumer debtors are not being reinvigorated and reintroduced into the productive, open-credit society.

I'm no empiricist, but it strikes me as potentially impossible to substantiate the premise of consumer bankruptcy policy empirically. It would be a monumental task to even formulate a research agenda for such a question. How would/could anyone ever prove that society benefits from relieving consumers of overburdening debts? Has anyone tried? Am I missing something I should be citing? Is anyone attempting to answer the question today? Any leads welcome.

Are Churches Slowly Recovering?

posted by Pamela Foohey

I'm thrilled to join Credit Slips as an occasional contributor. As Bob mentioned, my research focuses on religious organizations that file under chapter 11. Based on the approximately 500 religious institutions that filed between 2006 and 2011 (about 90 cases per year), I previously concluded that primarily small nondenominational and congregationalist Christian churches seek to reorganize in hopes of retaining their buildings after they have fallen behind on mortgage payments. I recently updated my database of religious organization chapter 11 cases through the end of 2013 to see if faith-based institutions filed in similar numbers over the past couple years. (My previous paper details how I identify these filings.)

2006-2013 Filings - 2This graph shows the number of religious organization chapter 11 cases filed per year (values on left axis) versus the total business chapter 11 filings per year (values on right axis) based on data from Epiq Systems. Religious organizations are still filing in what some might view as substantial numbers: 107 cases were filed in 2012 and 89 cases were filed in 2013. Similar to total chapter 11 filings, their filing numbers are declining. On average, religious organization cases still account for about 1% of chapter 11 filings every year. 

Continue reading "Are Churches Slowly Recovering?" »

Bankruptcy Filings Fall 13% in 2013

posted by Bob Lawless

2013 Projected Filings from DecemberThe year-end bankruptcy data from Epiq Systems just became available. Total bankruptcy filings in 2013 were 1,032,326, a 13% decline from the previous year. (Note the precise total will be subject to minor final adjustments.)

On a monthly basis, the daily filing rate in December was down 16.3% on a year-over-year basis. The monthly decline continues a long-term trend of falling bankruptcy filing rates. Filings are currently running around 3.3 per 1,000 persons. Last year at this time, it was 3.8 per 1,000 persons as compared to a post-2005 high of 5.0 bankruptcy filings per 1,000 persons, which occurred in September 2010.

Once December consumer credit statistics and recent economic indicators become available, I will try to make a forecast of where bankruptcy filings might be heading. This year, I predicted between 1,019,000 and 1,100,000, although that was in a May posting with four months of data available so I was cheating a little. Still, I take it as a predication.

(Yet Another) Chapter 13 Map

posted by Bob Lawless

Chapter 13 Percentages by DistrictThis post will have to be short on commentary -- "yay!," goes the reader -- as I am in the middle of getting ready for a conference. One of the things that preparation entailed is putting together the map to the right. To see the map well, you will need to click on it and a bring up a full-size image in a pop-up box.

The map shows the percentage of all 2013 bankruptcy cases that were chapter 13s in the 90 federal judicial districts in the fifty states and the District of Columbia. Over the years, I have put up numerous maps and tables about chapter 13 rates. This map shows the same patterns we have seen in the past in terms of both the range of variation and geographic concentrations of high chapter 13 districts. This version is different because it (a) uses 2013 data (through November) and (b) has groupings based on a cluster analysis. (A cluster analysis finds "natural" groupings of data based on the data's statistical properties.)

If anyone else has a use for the map, feel welcome. All I ask is attribution back to this post.

As Bankruptcy Filings Fall, the Percentage of Chapter 13s Rises

posted by Bob Lawless

Percentage 13sThe latest bankruptcy filing statistics from Epiq Systems have just been released. They show that U.S. bankruptcy filings in November were just over 3,700 per business day. That is a 15.0% decrease on a year-over-year basis from last November. With just one month left in the calendar year, it looks like 2013 will see a total of around 1,030,000 total bankruptcy filings, representing a 13.1% decline in bankruptcy filings as compared to 2012.

My posts on the bankruptcy filing rate inevitably lead to questions about the reasons for the decline. If you are new to the blog, you can find many old posts discussing the reasons for the decline on our bankruptcy data page. I will try to write more about the patterns and trends I see in the bankruptcy filing rate decline after the first of the year when the full year's worth of data is in. 

Until then, it seemed useful to note that the percentage of bankruptcy cases that are chapter 13s has been increasing ever since the bankruptcy filing rate started declining in 2011. In an earlier post, I noted that the decline in the filing rate seems to be less in judicial districts where chapter 13 rates are high. A similar dynamic appears to be present in the annual data. Chapter 7 filings seem to have greater variation than chapter 13 filings, although it is fair to say the effect is not of a huge magnitude. 

The Second Derivative on the Bankruptcy Filings Rate

posted by Bob Lawless

Moving Average Bankruptcy Filings 2008 - 2013It's been a while since my last blog on bankruptcy filing rates. Indeed, the blogging has been slow for me since I got some new responsibilities in the day job. It's time that changes.

The bankruptcy filing rate continues to decline. That is bad news for bankruptcy lawyers but good news for, well, people. The second derivative, however, seems to be declining -- that is the rate of change in the rate of change is slowing, albeit barely. Instead of year-over-year declines each month of 14-15% as was happening last year, declines are now around 11-12%. Year-over-year declines the past three months have been -11.0%, -12.5%, and 11.4%.

Continue reading "The Second Derivative on the Bankruptcy Filings Rate" »

New Empirical Paper on Home Mortgage Foreclosure and Bankruptcy

posted by Melissa Jacoby

RibbonHouse Cross-campus colleagues and I have posted a paper that studies intersections between mortgage foreclosure, chapters of bankruptcy, and other variables, using the Center for Community Capital's unique panel dataset of lower-income homeowners. An excerpt from the abstract:

We analyze 4,280 lower-income homeowners in the United States who were more than 90 days late paying their 30-year fixed-rate mortgages. Two dozen organizations serviced these mortgages and initiated foreclosure between 2003 and 2012. We identify wide variation between mortgage servicers in their likelihood of bringing the property to auction. We also show that when homeowners in foreclosure filed for bankruptcy, foreclosure auctions were 70% less likely. Chapters 7 and 13 both reduce the hazard of auction, but the effect is five times greater for Chapter 13, which contains enhanced tools to preserve homeownership. Bankruptcy’s effects are strongest in states that permit power-of-sale foreclosure or withdraw homeowners’ right-of-redemption at the time of auction.

Bear in mind that most homeowners in foreclosure in this sample did not file for bankruptcy. Among the 8% or so who did, the majority filed chapter 13. For even more context, please read the paper - brevity is among its virtues, and exhibits take credit for page length. A later version will ultimately appear in Housing Policy Debate.

Ribbon house image courtesy of Shutterstock.

Bankruptcy Filing Rate Decline Is Historically Anomalous

posted by Bob Lawless

2013 Monthly Filings Thru JuneThe latest bankruptcy filing figures from Epiq Systems show that the daily filing rate declined again in June 2013 by 11.5% on a year-over-year basis. There were 83,580 total bankruptcy filings in the month for a daily filing rate of 4,179 spread over the 20 business days in June. 

In the 2013 calendar year, there have been over 544,000 bankruptcy filings. For the past two years, bankruptcy filings for the first six months have been 53% of the total filings for the calendar year. A simple extrapolation thus suggests there will be approximately 1,020,000 bankruptcy filings in the 2013 calendar year. 

I updated the chart to the right, which has appeared on this blog in the past. (A mouse click on the chart will bring up a larger version in a pop-up window.) The chart shows the daily bankruptcy filing rate since 2004, making adjustments for the population growth that has occurred over that time. As the chart demonstrates, there has been a steady decline in the bankruptcy filing rate since early 2010.

Continue reading "Bankruptcy Filing Rate Decline Is Historically Anomalous" »

May 2013 Bankruptcy Filing Numbers Continue Trend

posted by Bob Lawless

The latest data from Epiq Systems are available, and they confirm my estimate last month of just over 1.0 million bankruptcy filings for the 2013 calendar year. Epiq Systems reports 96,430 bankruptcy filings for the month of May. Spread over the 22 business days in the month, that is a daily filing rate of 4,383. The daily filing rate is a 12.0% decline on a year-over-year basis.

If one extrapolates the filing rates from the first five months over the rest of the calendar year, the prediction remains for just over 1.0 million total filings in 2013. This figure would be a 14% annual decline.

Annualized, the bankruptcy filing rate stands at 3.54 filings per 1,000 persons. The last time the filing rate was lower was November 2008, when the bankruptcy filing rate was still experiencing the dip in filings that occurred right after enactment of the 2005 bankruptcy law. If one takes a longer view and considers the filing rate gyrations around 2005 as a statistical anomaly, the last time the filing rate was this low was 1995.

Bankruptcy Filings Over the Next 12 Months

posted by Bob Lawless

2013 Projected Filings from MayBankruptcy filings have continued to decline, and using data supplied by Epiq Systems, my analysis suggests the same trend will occur over the next twelve months.

First, looking back at March and April, bankruptcy filings declined 12.0% and 11.8% respectively on a year-over-year basis. The daily filing rate in March was just short of 4,900 and in April was 4,575.

If we extrapolate these numbers out over the rest of the year, bankruptcy filings should just barely surpass 1.0 million for calendar year 2013. If filings continue for the rest of 2013 at the same pace they have for the first four months, the number will be closer to 1.1 million, but the filing rate is typically strongest in the spring and then tapers off each year. Thus, a figure closer to 1.0 million is more likely and that rate of filing would represent an annual decline of 14% in the number of U.S. bankruptcies for the second straight year in a row.

Continue reading "Bankruptcy Filings Over the Next 12 Months" »

Bankrupt Churches

posted by Bob Lawless

My colleague, Professor Pamela Foohey, has just posted a paper on SSRN about religious organizations that have filed chapter 11. While the Roman Catholic dioceses bankruptcies have grabbed a lot of attention, Foohey identifies 509 other cases filed by faith-based organizations from 2006 - 2011. The amount of work in this study is impressive. Foohey individually reviewed each of the 60,000+ chapter 11 cases filed during that time frame to find the faith-based bankruptcies. The result is a census of faith-based organizations in chapter 11, including churches, schools, and community-assistance organizations.

Continue reading "Bankrupt Churches" »

Does Chapter 13 Prop Up Bankruptcy Filing Rates?

posted by Bob Lawless

Declines by Judicial District 2012Yesterday, I noted the 14.1% decline in U.S. bankruptcy filings during 2012. Bankruptcy filings did not decline at the same rate everywhere, of course, although they did decline in 89 of the 90 judicial districts in the U.S. (not counting judicial districts in U.S. territories). In the Middle District of Alabama, bankruptcy filings even actually climbed (although by only 9 total filings out of almost 7,800).

The table to the right shows the twenty federal judicial districts where bankruptcy filings declined the least. One thing immediately leaps out: many of these districts are places where the percentage of chaper 13 bankruptcies is very high.

Continue reading "Does Chapter 13 Prop Up Bankruptcy Filing Rates?" »

Bankruptcy Filings Fall Dramatically in 2012

posted by Bob Lawless

2012 Bankruptcy FilingsThe 2012 calendar year bankruptcy statistics from Epiq Systems hit my in-box last night. They show that total U.S. bankruptcy filings declined in 2012 by 14.1 percent. Specifically, there were just over 1,185,000 filings in 2012 as compared to 1,380,000 in 2011.

The decline will not come as any surprise to regular readers of the blog. Bankruptcy filings have been declining since November 2010 and fell consistently throughout 2012. The question is whether bankruptcy filings will continue to decline. In a previous post, I thought they might level off in 2013, and I am working on a more complete analysis.

Continue reading "Bankruptcy Filings Fall Dramatically in 2012" »

Today's Bankruptcy Statistics Challenge

posted by Bob Lawless

A friend wrote me and pointed out that Chief Justice Roberts's annual report noted that bankruptcy filings had declined in "89 of the 90 bankruptcy courts." He wondered which court was the exception, and for that sort of information, he wrote me.

The question has become today's bankruptcy statistics challenge. You may put your answer in the comments, but no fair looking it up. There are a few caveats. First, the chief justice was citing the statistics for the government's fiscal year, which ran from October 1, 2011 to September 30, 2012. Second, the chief justice's statement was only for bankruptcy courts in the states and not any in of the territories.

Look for the answer in a post later today about the bankruptcy filing statistics for the 2012 calendar year.  Also, be on the lookout for a post with a disquisition on what one's life has become when your friends write to you to get answer to bankruptcy statistical questions.

Undocumented Debtors

posted by Katie Porter

Immigration issues continue to be a major political football, and the work of Jean Braucher, Bob Lawless, and Dov Cohen on race in bankruptcy garnered front-page NY Times attention this year. This makes the publication of Chrystin Ondersma's paper titled Undocumented Debtors particularly timely. The paper is the first-ever look (to my knowledge) at whether and how undocumented people file bankruptcy. The key finding is that while it seems legal--and indeed arguably explicitly contemplated by the bankruptcy system--that undocumented people may file, the rate of filings is very low--on the order of less than one percent of the rate of debtors in the general population. Ondersma also provides a good overview of the credit systems available to undocumented people, ranging from those offered by large national entities, such as ITIN mortgages, to informal mechanisms such as tandas.

Continue reading "Undocumented Debtors " »

The Last U.S. Bankruptcy Filing -- October 11, 2018

posted by Bob Lawless

Downward TrendAfter some fancy computing, it appears the last U.S. bankruptcy filing will occur on October 11, 2018. The model suggests it will occur about 10:00 PM, although there is a margin of error such that we should allow for anything between 9:00 to 11:00 PM. These projections are based on the latest bankruptcy filing figures, which continue to show a downward trend for the 25th consecutive month.

In November the daily bankruptcy filing rate fell 11.8% on a year-over-year basis. There were almost 87,000 total U.S. bankruptcy filings spread over the 20 business days in November, which makes for a daily filing rate of 4,347. The last time the daily filing rate was lower was June 2008. As always, thank you to Epiq Systems for providing the data. 

Continue reading "The Last U.S. Bankruptcy Filing -- October 11, 2018" »

Crystal Ball Department: Bankruptcy Filings to Rise in a Few Years

posted by Jean Braucher

Good times in the economy mean goods times a few years later for bankruptcy professionals who deal with consumer cases.  We saw this from the mid-1990s through the 2000s. The last big party in the bankruptcy world was in 2010 (1.5 million non-business cases filed!), a few years after the end of the last debt binge came to a crashing halt starting in 2007.  The reverse is also true.  Bad times in the economy make for fewer bankruptcy filings a few years later, which is what we have been seeing lately.

Those of us who blog on Credit Slips get frequent calls from reporters asking about bankruptcy filing statistics, specifically:  what do they mean?  Filings, which are mostly consumer filings, have gone down steadily for two years now, so it gets hard to come up with anything new to say, as Bob Lawless recently wrote here.

When filings go down, reporters new to the bankruptcy beat often think that means the economy must be getting better. Wrong. What drives bankruptcy filings is debt.  Decreases in debt are followed a few years later by decreases in bankruptcy, and increases in debt are followed by increases in bankruptcy.  The Great Recession that started in 2007 resulted in a great decline in household debt due to a combination of reduced access to credit and consumers voluntarily cutting back on debt-driven spending because of a lack of consumer confidence.

It’s so old hat to talk about the continuing decline in bankruptcy filings, produced by a long process of household deleveraging (meaning taking on less debt and instead paying off old debt), that I’m going out on a limb with a prediction. We may finally be seeing signs of a reversal in progress—consumer confidence going up, which should drive up debt volume, and presto chango, we’ll see more bankruptcy in a few years. Bankruptcy attorneys, take heart: recovery will mean a return to your good times, too, but a few years hence. 

Continue reading "Crystal Ball Department: Bankruptcy Filings to Rise in a Few Years" »

Bankruptcy Rates Keep Falling, and I Have Run Out of Ideas for Headlines to Describe It

posted by Bob Lawless

2012 Projected Filings from AugustIn August 2012, the daily bankruptcy filing rate fell 13.7% on a year-over-year basis. We have had twenty-two consecutive months of year-over-year declines. Indeed, the daily filing rate in August 2012 was 26.4% lower than the same time in 2010.

Although the month of August was a decline in relative terms, it is probably worth bearing in mind that the absolute number of bankruptcy filings still represents a lot of households. Even with the decline, there were just over 104,000 bankruptcy cases in August or over 4,500 each and every business day. As always, these figures are courtesy of Epiq Systems.

It is hard to say when the decline will stop. The headline says it all -- I don't what else to say in these monthly posts other than that the daily filing rate keeps declining. My instinct is that bankruptcy filing rates will at least begin to level off in 12 - 24 months as more debt accumulates on household balance sheets, although that is again just an instinct coming from historical patterns and somewhat increased consumer sector borrowing.

Looking ahead to the rest of 2012, it appears we will have around 1.20 million bankruptcy filings. For there to be more filings than that, we would have to maintain the average for the first eight months of the year, but with bankruptcy filing rates declining, the lower end of of my estimates are probably the most likely outcomes.

Paul Ryan's Bullshit About Bankruptcy Data

posted by Bob Lawless

Bankruptcy Filings & CreditThe philosopher Harry Frankfurt famously published his book, On Bullshit, where he distinguished lying (intentional disregard of truth) from bullshit (apathy as to the truth). Frankfurt argued that bullshit harms public discourse more than lying. Liars at least acknowledge the truth matters, although consciously choose to disregard it, but the bullshit artist displays a contempt for facts. To the bullshitter, facts are irrelevant.

Yesterday, Paul Ryan and his campaign put themselves firmly in the bullshit category, at least when it comes to bankruptcy statistics. Ryan said:

In 1980 under Jimmy Carter, 330,000 businesses filed for bankruptcy. Last year, under President Obama’s failed leadership, 1.4 million businesses filed for bankruptcy.

Both the New York Times and ABC News noted several problems with Ryan's statement. Most notably, Ryan conflated the total number of bankruptcies with the number of business bankruptcies. When ABC News called out Ryan for his misstatement, an official Ryan spokesman pulled out another doozy:

Continue reading "Paul Ryan's Bullshit About Bankruptcy Data" »

Consumer Bankruptcy Fee Study

posted by Alan White

I have just finished reading Lois Lupica’s paper on her impressive consumer bankruptcy fee study.  This is a model of what empirical, law-and-society research should be – it combines data from electronic court records with focus groups and key player interviews to give a textured understanding of the role lawyer’s fees play in this particular legal system. 

The finding that jumped out for me was a little-discussed but critical aspect of local bankruptcy culture: not how much, but when the trustee pays Chapter 13 lawyers’ fees (pp. 105-106). I practiced in a district where (before BAPCPA) the trustee paid out the fees as the first priority claim i.e. ahead of even secured creditors, but adequate protection payments (current mortgage and auto loan payments, e.g.) were paid directly to the creditors.  There are apparently districts where every plan must include a $200 monthly payment for the first 15 months to pay the attorney, others where the pre-confirmation adequate protection payments are diverted to the attorney’s fees and added to the arrears paid over the remaining plan life (i.e. borrowed from secured creditors), and many other fascinating variations.

Considering the practical consequences of these disparate rules for attorneys as they decide what cases to take, and how to structure plan payments, it is easy to see why Chapter choice, and Chapter 13 success rates, would vary so dramatically from one district to another.  For example, the front-loading of payments for the legal fee, followed by a payment step-down, would seem to increase the risk of plan failure. The sooner the lawyer is paid, the less risk she takes in filing the case.  That could increase access, but could also encourage filing more risky Chapter 13 plans. If we are concerned about the high failure rate of Chapter 13s on the one hand, and the high costs and difficulty of obtaining counsel on the other, we might do well to study these variations further to see what outcomes they produce for debtors, creditors and lawyers.

It also struck me that Professor Lupica's extensive data tables with fees actually paid, by chapter, state, district and case outcome, and no-look fees for Chapter 13, can provide important independent variables for other studies modeling bankruptcy outcomes.

Bankruptcy Filings Still Falling

posted by Bob Lawless

Year Over Year Changes.July 2008 to July 2012On a year-over-year basis, the bankruptcy filing rate has been dropping around 12-16%, and last month was no exception. According to the most recent data from Epiq Systems, the daily bankruptcy filing rate in July was 4,622. That represents a 16.1% decline from the same time last year year and a 2.0% decrease from June.

We continue to be on track for just above or below 1.2 million filings for the 2012 calendar year. That will be a 13.9% decline from 2011 (1.38 million filings), which in turn was a 13.6% decline from 2010 (1.56 million filings).

The graph to the right shows the year-over-year changes since July 2008. (Clicking on it will bring up a larger version in a pop-up box.) The huge increases in 2008 were the lingering effects of the BAPCPA, the 2005 changes to the bankruptcy law. The filing rate was still recovering from the huge and artificial rise and then drop in filings around the time of the law's passage. Since November 2010, however, the year-over-year changes have been consistently negative and have been in the -12% to -16% range since May 2011. At what point will these declines stop?

What's On at a Courthouse Near You

posted by Melissa Jacoby

In addition to a post last week broadly raising visitors' physicial interaction with courts, an earlier post discussed variation in the website availability of daily calendars for U.S. bankruptcy courtrooms. Today's post follows up on this narrower thread for two reasons. First, some who responded privately were interested in hearing what else was discovered. Second, the end of Judith Resnik's recently published Addison C. Harris lecture stresses that public access to court proceedings is more than of merely conceptual importance. While she observes that, "obtaining  a robust audience for courts also requires structural attention," it turns out that "many judges report their courtrooms to be lonely spaces" and "[i]n contrast to the popularity of media shows about courts, real judges often find themselves without an audience."(p. 339) These were not references to bankruptcy court (the lecture recognizes in other places that the nature of bankruptcy work occupies more courtroom time notwithstanding the phenomena of managerial judging and vanishing trials), but tee up the issue raised earlier: why don't all public courts post calendars on their websites? 

Continue reading "What's On at a Courthouse Near You" »

Bankruptcy Filings Are Down -- Everywhere

posted by Bob Lawless

With half the year over, there is half of the year still to go. For our few readers who might actually know the quote--yes, that is a tribute to the legendary Murray Walker. Giving our place in the calendar year, it seemed like an appropriate time to look where things stood with bankruptcy filings.

According to data from Epiq Systems, there were 632,130 bankruptcy filings in the first half of 2012. Using a sophisticated mathematical model where I multiple that figure by two, I get a projection of approximately 1.25 million bankruptcy filings for the 2012 calendar year. That projection is slightly too high because filings in the first half of a year historically are slightly larger than in the second half. If the past few years are a good guide, it looks like there will be just above or below 1.2 million filings in 2012. If that projection holds, there will be a 13.0% year-over-year decline in the bankruptcy filing rate.

Continue reading "Bankruptcy Filings Are Down -- Everywhere" »

Chapter 13 Disparities: This Time with a Map

posted by Bob Lawless

State Disparity in Chapter 13 UsageA few weeks ago, I put up a post describing the states with the highest and lowest per capita bankruptcy rates by chapter of the Bankruptcy Code. A closely related data point is which states have the highest percentage of bankruptcies that are chapter 13s. States with a high per capita rate of chapter 13s not surprisingly are the same states that tend to have the highest percentage of banrkuptcies that are chapter 13s.

Anyway, my point is that I made a map. Actually, I had to make the map of chapter 13 filing percentages for another purpose, and I thought maybe some other persons might have a use for it. So here it is. You are welcome to use it. If you want to download it, be sure to click on it so that a larger version opens up in a pop-up window. If you do use it, all I ask is that you attribute it back to Credit Slips and me.

Save the American Community Survey

posted by Bob Lawless

The Credit Slips blog always has tried to offer perspectives from many different social sciences. That is why many readers may be distressed to learn of the attack on the American Community Survey (ACS). If you do not do a lot of social science work, you may not be familiar with the ACS. It is an arm of the Census Bureau that provides all sorts of information about what is happening in the United States. For example, did you know that people with a college degree live, on average, about two minutes further away from their workplace? At 30 MPH, that would be one mile further away. This small fact from the ACS, which we use as an example in our empirical methods book, might tell us a lot about the structure of cities and social stratification. And, this example is a poor one because it undersells the important data in the ACS on everything from income to drug use. I have used the ACS in my work to get information on consumer financial conditions in various states. There are all sorts of uses for these data in governmental, academic, and business circles.

Continue reading "Save the American Community Survey" »

Bankruptcy Court Calls

posted by Melissa Jacoby

In connection with some ongoing research, I have noticed that U.S. bankruptcy courts have different approaches to informing the public about matters being taken up in open court. Many provide PDFs of court calls on their websites up to several weeks in advance (recognizing that matters settle, are postponed, or can change for other reasons). But on other bankruptcy court websites, it is difficult to find out what's happening on any given day. Might the informed readership of this blog offer reasons that courts refrain from making that information available on their websites? If you'd rather not comment directly on this post, feel free to write me privately at bankruptcyprof@gmail.com. 

Where People File Chapter 13

posted by Bob Lawless

State Chapter 13 RatesBetween states, there is a big disparity in the rate at which people file bankruptcy. Over the past four years, Nevada has had the highest bankruptcy filing with an a yearly average of 9.32 persons per 1,000 population file bankruptcy. At the other extreme has been Alaska with just 1.39 persons per 1,000 filing bankruptcy. As points of comparison, consider that the national filing rate over 2008 - 2011 was 3.54 per 1,000 population and that the national filing rate over the last twelve months has been 4.26 per 1,000 population.

I wondered how the filing rates would break down if we looked at just chapter 7 and chapter 13 separately. The result is the chart to the right.

Continue reading "Where People File Chapter 13" »

Downward Bankruptcy Filing Trend Continues

posted by Bob Lawless

2012 Projected Filings from MarchBankruptcy filings for March continued to show a year-over-year decline. According to the latest release from Epiq Systems, there were an average of 5,550 daily bankruptcy filings in March, which represented a 12.8% decline from the same time last year. This decline keeps with the same trend we have been seeing for the past eleven months.

Extrapolating from the first quarter of 2012 and based on the experience of the immediate past three years, a projection for total bankruptcy filings this calendar year would be in the 1.21 - 1.25 million range. My projection of a 9 - 12% decline in bankruptcy filings for 2012 is somewhat higher than the projection from Fitch for a 4 - 5% decline. Although the Fitch projection is not outside the realm of possibility, it would require a historically unusual pattern where bankruptcy filings stay closer to their peak in the annual cycle that sees February and March as the months with the highest U.S. daily bankruptcy filing rate.

Tax Rebates Lead to Bankruptcy Filings

posted by Bob Lawless

Jialan Wang has a blog post up summarizing her and her co-authors very interesting NBER paper estimating that at least 30,000 to 60,000 liquidity constrained households this will be priced out of bankruptcy because of the increased costs that came with the 2005 changes to the bankruptcy law. Actually, the research does not find that tax rebates lead to bankruptcy filings -- that was just a cheesy trick to get you to read the post. The researchers find that, after receiving tax rebates, people are more likely to file bankruptcy as they now have funds they can use to pay for the bankruptcy fees. They then use the randomization of the delivery of tax rebates in 2001 and 2008 to identify the effect that the higher fees caused on the bankruptcy rates of liquidity constrained households. It is a clever research design, and Credit Slips readers will want to check it out.

No Surprise: Bankruptcy Filings Jump in February

posted by Bob Lawless
Monthly Filing Trends 2008 to 2011

Bankruptcy filings rose in February, but the spike in filings keeps with historical trends. According to data from Epiq Systems, there were over 104,000 bankruptcies in February 2012. Spread over the 20 business days during the month, the daily February filing rate was 5,221 as compared to only 4,399 in January. This is a rise of 18.7% in one month, a matter of concern perhaps at first glance but no surprise on further analysis.

It seemed time to update a chart I have used in the past. The graph to the right shows month-to-month changes in the daily U.S. bankruptcy filing rate from 2008 through 2011. Late winter and early spring always see a spike in bankruptcy filing rates -- the cylicality persists even in previous years.

The graphs also show an amazingly consistent trend where the daily bankruptcy filing rate slowly erodes throughout the year. A simple regression on each year implies that the daily filing rate erodes an average of around 1.3% each month from its high in the early part of the year. This downward trend over the course of the year is true even in years like 2009 and 2010 when the total annual bankruptcy rate increased as compared to the previous year. Thus, when bankruptcy filings go up on an annual basis, the bulk of the increase comes in the early part of the year.

Continue reading "No Surprise: Bankruptcy Filings Jump in February" »

Evaluating Mandatory Financial Education in Bankruptcy

posted by Katie Porter

In 2005, Congress amended bankruptcy law to require individual debtors with primarily consumer debts to complete an "instructional course on personal financial management" to be eligible to receive a discharge of their debts. Adding financial education as a bankruptcy requirement divided the bankruptcy community, even debtor advocates, judges, academics, and others who almost uniformly did not like the 2005 amendments. Part of the mixed sentiment about the financial education may be that it is hard to dislike something as innocuous-sounding as education (although Professor Lauren Willis makes a good case against it in this article). And there were certainly bigger fish to fry in opposing the 2005 laws. Still, many complained that this was one more example of creditors getting Congress to lard on duties for debtors, driving up the cost and work of obtaining bankruptcy relief and setting up debtors to have their cases dismissed if they tripped up by failing to complete the educational course.

Dr. Deborah Thorne and I have a new study that looks at how debtors themselves feel about the mandatory financial education course. It is a chapter in this book, Consumer Knowledge and Financial Decisions (ed. Douglas Lamdin, Springer, 2012) and available to read here. In the 2007 Consumer Bankruptcy Project, we asked debtors whether they believed that the information from the financial education class 1)would what they learned in the financial education class have helped them avoid bankruptcy originally, and 2) would help them avoid financial trouble in the future. While only 33% thought a financial instruction course similar to the one required of bankruptcy debtors could have helped them avoid filing, 72% thought it would help them avoid future financial trouble. As we report in detail in the chapter, some demographic groups were much more positive about the value of financial education than others.

Continue reading "Evaluating Mandatory Financial Education in Bankruptcy" »

Littwin on Bankruptcy Without a Lawyer

posted by Bob Lawless

A few weeks ago, Katie Porter noted the release of the new book, Broke: How Debt Bankrupts the Middle Class. We are trying to feature posts from the authors of Broke about their contributions. Today's post comes from Professor Angela Littwin of the University of Texas School of Law and a founding member of Credit Slips:

After a long absence, I am temporarily back on Credit Slips, blogging about my contribution to Broke, the new book edited by Credit Slips’ own Katie Porter. My chapter is about consumers who file for bankruptcy without a lawyer (known as filing “pro se”). The chapter is entitled The Do-it-Yourself Mirage: Complexity in the Bankruptcy System. which should give you a pretty good idea of my take on the matter. Using data from the 2007 Consumer Bankruptcy Project, I found that pro se filers were significantly more likely to have their cases dismissed than their represented counterparts. My most interesting result deals with education. My analysis suggests that consumers with more education were significantly more likely than others to try filing for bankruptcy on their own, but that their education didn’t appear to help them navigate the process. Pro se debtors with college degrees fared no better than those who had never set foot inside a college classroom. I argue that bankruptcy has become so complex that even the most potentially sophisticated consumers are unable to file correctly.

This bad news, however, is not the entire story.

Continue reading "Littwin on Bankruptcy Without a Lawyer" »



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