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Revisiting Increases in the Bankruptcy Filing Rate

posted by Bob Lawless

Bankruptcy_filing_rate_mapmay_june_ From time-to-time, I try to check how the bankruptcy filing rate is changing around the country. We know bankruptcy rates are going up nationally, but looking at variations by geographic region tells us something about how different parts of the country are doing economically.

The map to the right is my latest effort. You have two choices at this point -- (a) magnifying glass or (b) turn off your pop-up blocker and click to get a larger version of the map. The map shows increases in the bankruptcy filing rate by federal judicial district comparing May and June 2008 bankruptcy filings to the same period one year previously. I used two months of data to minimize the effect one particular month's results would have. The boundary lines for federal judicial districts are not necessarily a perfect geographic unit for these purposes, but they do  tend to provide large enough geographic units within state to allow for some localized comparisons. For example, they distinguish between northern and southern California.

The map is color coded by decile. There are ninety judicial districts in the fifty states plus the District of Columbia. Hence, each decile represents nine districts.

Bankruptcy_filing_rate_tablemay_j_2 The national average across all judicial districts is an increase in bankruptcy filings of 27.7% in May and June of 2008 as compared to the same time period one year previously. This increase has not been spread uniformly across the country. Only 26 of the 90 judicial districts were above the national average of 27.2%. The increases in the judicial districts at the top decile have been dramatic, over 60% as compared to one year earlier. In contrast, the nine judicial districts in the bottom decile have actually seen decreases in their bankruptcy filing rate. I don't want to oversell this as "most of the country is doing great." Sixty-nine judicial districts saw a rise of at least 10.0%, and a 10.0% rise in your bankruptcy filing rate is not exactly a sign of booming economic times. The point is not that most are doing well but that some are doing much worse than others. The complete details appear in the table to the right.

As compared to a similar map from a few months ago, this map shows that California, Florida, Arizona, Nevada, and Minnesota continue as the areas with the largest increases. The New England states, while previously showing big increases, still has some areas with big increases. Notably, Massachusetts is no longer one of the "big increase" states, although a 16.9% increase in bankruptcy filings there shows the state is hardly on the verge of an economic boom. Moving into the top deciles of increases are judicial districts in Oregon, Utah, New Mexico, and Wisconsin. The mid-Atlantic region previously had some of the highest increases, but it now shows less activity, although the District of Columbia, the Eastern District of Virginia, and Delaware still are areas with large increases. Many of these states are places often mentioned as places particularly hit by the mortgage foreclosure crisis.

The places that had the lowest increases or even decreases in filing rates tend to be in the middle part of the country, the lower Midwest and Great Plains. Also, some parts of the South are have relatively low increases. First, I wonder what effect these variations might have on the coming presidential elections. To the extent bankruptcy filing rates measure the economic well-being of the area, I wonder whether voters in these states will perceive economic times to be as tough as voters in other areas. Notably, the oft-mentioned swing states of Pennsylvania and Ohio have had some of the lowest rates of increase in bankruptcy filing rates.

Second, I wonder whether these different economic outcomes will affect the political support or opposition for foreclosure and credit market reform. Do these varying filing rates predict support or opposition, for example, for the recent housing bill that made its way through Congress? Do they help to explain the position of other members of Congress toward mortgage and credit market reform? It's getting late on a Friday evening, and I'm done with this post. Perhaps someone who is cleverer and has more time can take the figures from the table and overlay them with congressional voting or support for the various credit-related measures in Congress.

Comments

Could you provide a link to the underlying time series data on filings?

Thanks for a great post!

Wonderful effort I wish Californians would take the time to digest, thanks for sharing.

Interesting - a map with absolute numbers would give a more complete picture. Filings per 100,000 residents, by distict. This map only shows short term change. Without the context of the underlying filing percentage per resident, it only tells an ephemeral story.

I think the whole idea is to see the change, or rate of change. Seeing raw numbers might give an idea what districts have softer or harder judges, but not show in which way the economy is going.

I wouldn't mind a bit larger map, however, the 73kb jpeg is almost too grainy to see the legand. Thanks

So does this mean people in "liberal" or "blue states" tend to be more
irresponsible with their money and personal values?

I don't think you can make that connection Dano. You are not factoring in the Job market and home values. ie. Jobs leaving, cutting of the work force, home values decreasing or the increased offering of "creative financing" on home mortgages, etc... It seems that were there was the biggest boom in real estate values is where we are seeing the higher filing rates. Personally I think it was the “creative financing” of Mortgages. “Liberal” lending standards perpetuated by the elimination of “conservative” lending standards, introduced and passed by majority by “Pro-Biz” legislators.

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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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