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Bankruptcy Filing Rate Climbs Slightly in November

posted by Bob Lawless

Filings_per_dayjan_2006_to_nov_2008 Don't let other headlines fool you. On a daily basis, the bankruptcy filing rate rose in November and went over 5,000 for the first time since the 2005 changes to the U.S. bankruptcy law. The 91,355 filings in November were a decline in absolute numbers from October, but spread over a month with only 18 business days, that's a daily filing rate of 5,075 and a 2.6% increase from October. If we don't count the day after Thanksgiving as a business day, the November filing rate represents an 8.6% over October. As always thanks to Automated Access to Court Electronic Records (AACER) for the data.

The November daily filing rate of 5,075 is an increase of 36.9% over the same time period the year before. The short-term trend over the past few months is a big part of the increase. The November 2008 increase in the bankruptcy filing rate comes on the heels of increases in July (2%) August (2%) September (2%) and October (8%). Remember that even small monthly increases compound to large annual increases. For example, if bankruptcy filings rose 2% each month, that translated into a 29% annual increase. The tightness of credit and the overall economy are the reasons for the increases in the bankruptcy filing rate.

With only one month left in the year, it doesn't take advanced math to estimate total bankruptcy filings for the 2008 calendar year. We are just a few hundred bankruptcies short of 1,000,000 for the calendar year, and we can expect about 100,000 filings in December. For the record, howe2008_monthly_filings_thru_novemberver, in 2008 we will have:

  • 1,095,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (4,347 per day) as they have averaged for the first eleven months of 2008
  • 1,112,000 filings if bankruptcy filings continue at the same daily rate (5,075 per day) as they have averaged for November
  • 1,086,000 filings if bankruptcy filings for the remaining month of 2008 constitute the same proportion of total filings as the last month of 2007 constituted for total filings that year (about 7.9%)


Filings for 2008 will reach about 1.1 million. This is still well below every year pre-BAPCPA going back to 1995. For example, 2004 filings were 1,597,000; 2003 were 1,660,000; 2002, 1,577,000; 2001, 1,492,000. On other words, filings in 2008, a disaster of a year financially if there ever were one, are 31% less than 2004, 2003 and 2002 each.

I remain convinced that filings are way down because attorneys fees are way up and the hassle, i.e., the credit counseling, the paycheck stubs for 60 days, the means test, turnover of tax returns, etc. chases prospective filers away. The credit card companies have gotten what they thought they wanted. Pre-BAPCPA, I'll bet more people filed and went out and started using credit cards again and now they are just hiding from the collectors. No new cards, no new ridculous terms.

Prof. Jon Hayes

Respectfully Prof. Hayes, I don't think it’s the fees as much as you think it is. Yes fees are up a bit but in 13s typically we only require a portion up front and we in essence "steal" away the rest from unsecured creditors (that’s how our local BK judge explains it anyway). Credit counseling I don’t think made much of a difference in the total filings. We have always had to produce paystubs and tax returns so that can't be it. This is my own personal opinion but to me what has changed for the worse is the "stigma". Boy, before the reform act people believed that you would lose everything if you filed any form of Bankruptcy. All of a sudden people hear on the news "It’s going to be harder to file" after 10/2005. What would those same people think after that? I talk to people every day about bankruptcy and when the process is finally explained we hear, "Oh, I should have done this a long time ago then".

Just went thru some numbers here in the Office today for Bob (because I know he likes numbers): 2007 we filed a total of 169 bankruptcies (7s and 13s). So far this year we have filed (7&13s more 13s than 7s) 240 bankruptcies. We expect to file another 10-15 more this month. At years end we will have a solid 20 case average.

First we theorized that the pipeline needed to fill, which would take less than a year. Then we theorized that the added costs and requirements retarded the filing rates. I give some credence to the idea that misinformation about how the difficulties in filing is at least a partial explanation for the lower-than-expected filing rates. But my intuition tells me that when we can explain why many debtors have prioritized credit card payments higher than mortgage payments, we will also have answered why they are not filing bankruptcies.

Hi there,

Would it be too much if I requested that your website has a link to subscribe to your postings via email?

Occasionally I forget to check back on your website and miss out interesting posts...

You can provide a link via Feedburner...

Go to www.feedburner.com, at the bottom of the page, type in your website url.

proceed to create an account.

once that is done, go to the publicize tab.

on the left hand side of the tab, you can see a 'email subscriptions- offer feed updates via email'. click on it.

follow the instructions from there onwards.

Before I forget, Thanks for all the good work!

Any predictions for 2009?

1.2 million Consumer Bankruptcies for 2009. 2.5 million at the very least if we pass mortgage modifications in Bankruptcy.

Man, I had to post this:

Just watched MSNBC at lunch today at about 1:30 pm and they had some journalist talking about consumer bankruptcies and boy did she blow it! If I took what that lady said at face value, I would not even talk to an attorney about filing a consumer bankruptcy. Of course I know better, but man did she blow it. She talked about Chapter 7 as a liquidating bankruptcy and that to discharge their debts the debtors assets had to be liquidated!????? Truth of the matter and the most important part "Most people do not have the kind of assets that could be liquidated in 7 (varying from state to state of course) "! If I didn't know anything about bankruptcy I would have come away with "If you file 7, you lose all of your stuff". When asked about 13 and foreclosure, she said NOTHING about the "stay" and how it could actually stop a foreclosure. Even when asked how bankruptcy would affect credit, she blew that question also. She made it sound like a credit death sentence. So, the media can be blamed for the low filings as well, which is the point of my previous post. Stigma stigma stigma!!! Maybe they need to read this blog more often.

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