U.S. Bankruptcy Filing Rate Holding Steady

The U.S. bankruptcy filing figures through June 30, 2008, have become available courtesy of Automated Access to Court Electronic Records (AACER). For June, the bankruptcy rate was 4,275 new filings per day. After a large increase in February and again in March when the daily filing rate hit 4,303, the rate has stayed fairly constant throughout April (4,236 filings/day), May (4,268 filings/day), and now June.

Do these latest figures mean the U.S. economy is recovering? Probably not. First, although the filing rate has been basically constant from March - June of 2008, the filing rate for those four months put together (4,270 filings/day) is 32% higher than for the same four months in 2007 (3,233 filings/day). Second, bankruptcy filings tend to lag the economic conditions that create them by at least a year and often longer. Today's economic conditions won't show up in the bankruptcy filing rate until much later. Third, the March - June 2008 plateau is consistent with patterns in the past few years. Given what we have seen the past few years, I expect the bankruptcy filing rate will stay roughly constant through the remainder of the summer and into the fall, perhaps even declining slightly in the late fall. At the beginning of 2009, we should see another increase in the filing rate.

The next table to the right updates my prediction for the total number of bankruptcy filings we will see for the 2008 calendar year. For 2008, total bankruptcy filings will be

• 1,025,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (4,069 per day) as they have averaged for the first six months of 2008
• 1,051,000 filings if bankruptcy filings continue through the rest of the year at the same daily rate as they have averaged for June 2008 (4,275 per day)
• 1,081,000 filings if bankruptcy filings for the remaining six months of 2008 constitute the same proportion of total filings as the last six months of 2007 constituted for total filings that year (about 53%)

Also, an analysis of the filing trend using regression techniques predicts a total of 1,051,000 filings for all of 2008 with a 95% confidence interval of 929,000 - 1,174,000 filings.

I have heard some estimates that the U.S. will not have 1,000,000 bankruptcy filings in calendar year 2008, but those estimates seem too low. So far in 2008, there have been 512,691 bankruptcy filings. With 126 business days left in the 2008 calendar year, bankruptcy filings would have to average less than 3,867 per day. That would represent a decline of almost 10%, a decline that seems very unlikely.

Comments

[Mike Dillon]

Professor, is there any way - short of reading each case individually - to tell how many of these bankruptcies were filed with the primary residence being the sole or only major asset involved?

Does anyone keep statistics on that at all?

[Bob Lawless]

In response to Mike Dillon: No, there is no way to tell how many of these cases were done to save the primary residence without an in-depth study. Those sorts of statistics are not regularly collected.