Bankruptcy Filings Continue to Rise in September

According to the folks at Automated Access to Court Electronic Records (AACER), preliminary figures show total U.S. bankruptcy filings in September at 67,286. That represents an increase from the 76,959 filings in August. Huh? Well, the September filings were spread over only 19 business days, but the August filings were over 23 business days. Thus, on the basis of filings per day, September filings were 3,541 as compared to 3,346. That's a 5.8% increase in September over August. One cannot read a lot into monthly variations, but that is the highest daily filing rate since the enactment of the 2005 bankruptcy law.

Updating the 2007 filings watch we get a range of 807,000 to 852,000 filings by year end based on:

• 807,000 if filings continue through the end of 2007 at the average rate for the first nine months of 2007
• 828,000 if filings continue through the end of 2007 at the rate for August 2007
• 852,000 if filings after September 2007 represent the same proportion of the total 2007 figures (about 71%) as the filings in September 2006 represented of the total 2006 figures

By any count, bankruptcy filings have been steadily rising since the 2005 bankruptcy law. But, as the chart to the right shows, claims that the total bankruptcy filings will soon equal their pre-2005 levels are overblown. Total filings in 2007 will be just slightly over 50% of what they were in 2004.

None of this should surprise us. The architects of the 2005 bankruptcy law set out to make bankruptcy more expensive and more time-consuming and less effective for people once they got there. The point was to drive away people from the bankruptcy courts. It looks like they got what they wanted. Of course, it's hardly a success to claim that bankruptcy filings are down. Consumers are hurting just the same, maybe more. Claiming victory by keeping people out of the bankruptcy system is like claiming victory over illness by closing the hospital.