Bankruptcy Filings Rising Faster Than Expected

In March 2009, data from Automated Access to Court Electronic Records (AACER) report there were almost 131,000 total U.S. bankruptcy filings for a rate of 5,945 filings per business day. That is a 9.2% increase from February and a year-over-year increase of 38.1%. It also is a 17.0% increase from November 2008, just before the annual dip in filings during December and January.

Anyway you look at it, bankruptcy filings are rising dramatically. The 9% growth in March may not sound like much, but it is an annualized growth of 280%, meaning annual filings would almost triple if they grew 9% each month. The rate of increase also seems to be rising. It took us thirteen months to go from 3,000 filings per day to 4,000 and another nine months to go from 4,000 filings per day to 5,000. In March, we almost broke the 6,000 filings per day figure. If we go over 6,000 filings per day in April, as we appear poised to do, it will have taken only six months to break that new plateau.

With the March data, that gives us one calendar quarter of 2009 filings, and I am comfortable to start making some projections for the entire calendar year. In 2009, we will have:

• 1,326,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (5,303 per day) as they have averaged for the first three months of 2009
• 1,447,000 filings if bankruptcy filings continue at the same daily rate (5,9455 per day) as they have averaged for March
  
• 1,476,000 filings if bankruptcy filings for the remaining nine months of 2009 constitute the same proportion of total filings as the last nine months of 200 constituted for total filings that year (about 78.1%)

Those figures would represent a 22% - 32% increase in bankruptcy filings this year. My prediction of 1.4 million filings in 2009 is starting to look a little low. Indeed, if the rate of increase keeps rising, we could see 1.5 million filings, although I think a figure of 1.45 million is more likely. Of course, if the bankruptcy mortgage modification legislation passes, then filings will be much higher (easily more than 1.6 million).

The March 2009 figures have returned us almost to the level before the 2005 law became effective. When I said that the last time, a reader questioned the accuracy of the statement. The graph to the right shows the filing rate per day since 2004 (as far back as I have data). The thin red line is provided as a visual reference to compare the current filing rate to past filing rates. The spike off the top of the chart is for a data point of 31,520 filings per day in October 2005, when people rushed to file to beat the effective date of the onerous 2005 bankruptcy law.

Comments

[Patches]

Man that graph takes my breath away. I mean, I fully remember working it and all and I remember how crazy it was in 96. We are talking like 25-35 up to 40 bks per month in 96, weird huh? I wonder how much of your chart accounts for growth? You know growth into the new law. You can't throw a big fat monkey wrench into a system and expect to bring it up to speed in a year or two. At the time of the 05 amendment we (our office)had been operating by the same basic set of rules for 10 years already. You have to be stream line efficient to make money in consumer bankruptcies.

It was a sense of urgency that I remember at the end of 04 and beginning 05. It was right when it started hitting the news. That's when I remember cases seeming to be like blurs. Especially 7s. To see it now at a distance is really sobering. I was getting that same feeling I got in 04-05 when talk about the amendment was hot and heavy. Honestly now, I am pleasantly surprised at some of the work-outs I have been seeing lately. Servicers still pretty much suck at modifying, especially in volume but I really think they are doing a tiny, tiny,(did I say tiny?) bit better. There may be some minor mitigation going on. Maybe the pressure is finally trickling down? We even got hit up by a Mortgage creditor the other day, all worked out and everything. There is still a ton of people to help out there though.

I am seeing quite a few higher income debtors come in and they almost always are NOT behind on their mortgage or their credit cards for that matter. It's the minimum payments on credit cards that are diving them to us. Really, you can't beat just paying principal on credit card debt and being done with it in five years. Those debtors seem to be more proactive now about filing. On the other hand we have our local oilfield workers who are getting laid off in droves down here. Why? The stupid drop in oil per barrel. They make good money but it's never consistent. Supper hard to budget in 13s. At to even a moderate amount over the median, with unexpected and immediate layoffs. But when price per barrel is 90 - 100 their never home, working turnarounds. The offshore platform workers have it weirder. They actually may have too much time off(when work is good), they do something like 20 on 10 off, something like that(don't shoot me down you Admiralty specialists out there). More time to spend money I guess.

All of that to say, you may be swaying me your way a bit and also to give you a local micro-view. You can't argue too much about the numbers......

[Patches]

Stephen Sather has some good numbers on our States (Texas) Chapter 11 filing numbers...... Double....
Here is the link: http://stevesathersbankruptcynews.blogspot.com/

[Jeff Riley]

My wife and I have lost our home in Florida to foreclosure. Our home was sold April the 3rd 2009. According to the clerks office the home( appraised at one time for $440,000) sold for $41,000 to an investment company. Our lender, CitiMortgage sued( Florida is a judicial state) us for the amount of the mortgage plus all cost coming to a total of $195,000. They obtained a summary judgment for that amount. We had filed a Chapter 13 shortly after being serviced with foreclosure papers in July 2008. However, due to my wifes and I continued loss of income( she was unemployed for 1.6 years at that time) and me having no real business( mortgage broker), we could not make plan payments so on the advice of our attorney we had the BK voluntarily dismissed. However and as we discussed with our attorney, it was our goal to re file in a couple of months or file a Chapter 7 and give up the home.
Unfortunately , we were still unable to produce income so we decided to have our attorney convert or refile to a Chap 7 given the fact we had already passed the means test etc.
After trying for 2 months to contact this attorney including certified mail, we have not heard from him. In the meantime, my wife found employment back in Texas where we owned a second home that we have now conversted to our homestead. It is important to note that we paid this attorney $2,000 and he has disappeared. ( I will contact the State Bar on this one).
back to my story on the foreclosure sale- I advised the clerk of the court that $41,000 must be the overages( as I was going to make a claim) and I was then advised that the lender had "let it go" to the investment company for the $41,000. I advised the clerk that I intend to object to this as lenders normally bid first in a foreclosure sale and that amount would be what we were sued for plus a $1 or $100 etc.
I have requested the bid sheet.
One of the problems is that I can now be exposed to a defiencny judgment. I know in Florida that the lender has to request a hearing on this. However, it is my wife and my intention to hire a bankruptcy attorney in Texas to file a Chapter 7 as soon as we meet the 6 months residence requirement and deal with any potential judgments past foreclosure as I understand this would be considered unsecured debt anyway and dischargeable in a Ch 7.
Since I only have a 10 day window to file a formal objection with the clerks office, I'm looking for a legal argument to base my objections.
I have contacted a realtor friend and appraiser that I utilized in Florida and currently the market value of the property is around $200,000.The tax assesor has it pegged @ $251,000
That said, why would the lender agree to a $41,000 sale and why would we not be offered that instaed of being forced through these proceedings, relocations etc. Additional they could have suggested a short sale and that would have certainly garnered in the $200,000's.
I could have easily borrowed up to $100,000 from personal sources had I know or been offered the opportunity.
I smell a rat and I'm looking for the solution. Any help would be appreciated.

[Patches]

Totally not a legal opinion..... but as far as Proof of Claims are concerned, I don't know that you only have 10 days to object, although objecting maybe a moot point if you are considering refiling here in Texas. If you are going to file (and qualify) for a 7 here in Texas then....who cares? That debt will be discharged in a 7. It's in a 13 where the extra money plays into the plan payment a bit. Someone correct me if I am wrong but you can object to a claim anytime during the life of the bankruptcy (even post discharge I think) You do only have 10 days to object or "appeal" an "order" from whatever court.

[Don Smith]

Don't the 1.45M forecasts just bring us back to the historical average? In my view, the BK filings have to spike harder than this. I wouldn't be surprised to see 7-8,000 per day over Q2 and even higher in Q3, because the big job losses came (and continue to come) this year, and people are underwater in their homes, have just lost jobs, and are getting their credit card rates jacked. My belief is that the little parabolic turn from jan-mar, will be continued.

[Don Smith]

Following on, unemployment checks will keep a few people from filing, but after a few months looking for a job, they're going to give up on the search and file BK.