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Get Last December's Figures Today!

posted by Bob Lawless

Only 107 days after the close of the calendar year, the Administrative Office of U.S. Courts (the "AO") has released bankruptcy filing statistics for 2006. The AO released the statistics in a press release under a headline stating "Bankruptcy Filings Plunge in the Calendar Year 2006" and contrasted the 617,660 filings in 2006 with the 2,078,415 filings in 2005. Thus, the AO's statistics conveniently match the conventional story told before passage of the 2005 bankruptcy law, namely that the system was plagued by filers who did not need it and who would be purged by a bankruptcy law that cracked down on abusive filings.

There are only two things wrong with the AO's press release. It is woefully outdated on the day of its release, and its comparisons are misleading.

First, let's explore the press release's old information. Two weeks ago, I posted about private data from AACER for the first quarter of 2007 that show U.S. bankruptcy filings on a trend to reach or perhaps top 1,000,000 in this calendar year. These same private data were the subject of an AP story. We are working our way back to the filing levels experienced before the 2005 law and much more quickly than I expected. Rather than bankruptcy filings plunging, the current view is that bankruptcy filings are on an upward trend.

One might ask why it is taking the AO so long to release filing data. Looking at the dates on the press releases from the AO's web site, it has released the previous calendar year's filing statistics on these dates:

  • February 19, 2002
  • February 14, 2003
  • February 26, 2004
  • March 1, 2005
  • March 24, 2006
  • April 17, 2007

It has been a long, slow steady progression of delay. This year, we did not receive the filing statistics for the last quarter of 2006 until after the first quarter of 2007 was already in the books. As my previous post on this year's filing trend indicates, receiving filing statistics that are over three months old can provide a misleading picture. I also posted about a data access issue--whether the AO is giving some persons access to their filing data before releasing them publicly. The AP story mentioned earlier suggested that some persons might already have seen the AO's statistics for the first quarter of 2007. If those statistics are available, they should be released to the general public.

Finally, I wanted to spend a moment on why the AO's press release is misleading where it compares 2006 filing data to the same data from 2005. As is well known, there was a huge number of persons who filed bankruptcy in the days and weeks leading up to the effective date of the 2005 bankruptcy law. Almost 550,000 people filed bankruptcy in the last quarter of 2005 and almost all of them just before the law went into effect on October 17, 2005. (See Charles J. Tabb, Consumer Bankruptcy Filing and Trends, available at http://ssrn.com/abstract=931172 for more details, especially at pp. 4-11). Those filings were done to avoid the harsh effects of the 2005 law, and thus the 2005 figures represent a large number of persons who would have filed later in 2006. Put another way, the 2005 law increased the number of filings in 2005 and decreased the number of filings in 2006. Although there is no question that filings declined in 2006, a direct comparison of the two years exaggerates the decline.

Oh, and the AO's data undercount business filers and overcount consumer filers (see here and Robert M. Lawless & Elizabeth Warren, The Myth of the Disappearing Business Bankruptcy, California Law Review, vol. 93, p. 745 (2005)), but you're probably all sick of hearing me say that.

Comments

Kevin Chern also suggests the AO's press release was misleading over at the Bankruptcy Lawyers Blog: http://blog.startfreshtoday.com/archives/practicing-bankruptcy-law-20052006-bankruptcy-filing-statistics-comparison-misleading-at-best.html

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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