Big Drop in December 2009 Filings--That's RIght, a Big Drop

On a daily basis, December bankruptcy filings fell to 5,304. That is a 12.8% decline from November. According to Automated Access to Court Electronic Records (AACER), there were over 116,600 filings spread over the 22 business days in December. The December figures do represent a 16.2% year-over-year increase, but that is the smallest year-over-year increase since the 2005 changes to the bankruptcy law worked their way through the system. Also, the end of the year tends to see drops in the daily filing rate, as we have seen this year, and the 2009 drops are higher than in previous years. The December 2008 drop was 10.8%

The bottom line is that bankruptcy filings continue their long-term rise, but the rate of increase is slowing. The December 2009 figures are right in line with my estimated increase of 17% for all of 2010 (which would bring us to around 1.7 million total filings annually). This is hardly great news but also hardly awful news considering that the past three years have seen annual increases of around 30%. I've updated the filing trend graph in an attempt to show the long-term trend.

The Wall Street Journal reported "Personal Bankruptcy Filings Rising Fast," a sentiment echoed in many other media reports about the December 2009 bankruptcy figures. Why the discrepancy between these dramatic reports and my more measured report? First, I don't have to sell advertising space or subscriptions. Second, the total December filing figures are actually above the November figures (116,600 as compared to 115,500), but there were three more business days in December. These media reports are relying on figures from the National Bankruptcy Research Center and passed along from the American Bankruptcy Institute, neither of which adjusts for the number of days in a month. Moreover, these reports emphasize the year-over-year increases without placing them in a larger context.

Comments

[Patches]

Nationally but not here locally. We filed 5 fewer BKs in December than November. 7 in the last 4 days of December. Two on New Years Eve! Supper odd for December based on my (sometimes) fuzzy recollection. We could have filed just as many but for our skeleton holiday crew here in the office. The line up for this first week in January is crazy! We are already booking 3 weeks into the future. That's because the recession is supposedly not as pronounced here in "STX" as it is on the East/West Coasts. December historically/locally has always been one of the Months that we file the least amount of BKs. Weird weird month.

I still think we could have surpassed 2 million filings Nationwide with BK Mortgage Mods in the picture. :) Casualty of War in the Health care debate I believe.

[Mike Dillon]

Professor, what are the chances that the drop was due, in part, to the "self-imposed" foreclosure moratoriums from some of the note holders/servicers for the month of December? Should/will Jan '10 numbers spike in correlation to Dec '09 drop?

[Bob Lawless]

First, Patches writes, “We could have filed just as many but for our skeleton holiday crew . . . .” I think a lot of law firms have a similar experience in December as hours are cut back during the end-of-the year holidays. That is one of the reasons December filings are always lower as compared to the rest of the year. That leads me to Mike Dillon’s good question. Yes, I think the foreclosure moratoria undoubtedly had some effects, but the much bigger effect is the historical cycle for bankruptcy filings. The end of the year usually sees a decline in the filing rate followed by an increase in the spring. January and (more likely) February filings will be up, but that will be due primarily to historical cyclicality.

[Patches]

MSN Money Article about Bankruptcies....

"Personal bankruptcy filings rise fast"

http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/personal-bankruptcy-filings-rise-fast.aspx?GT1=33009

They should have red you post before submitting the story.. They could have used your stats for contrast...

[Patches]

red....lol....read! booo. F-

[Mark Buckley]

I've practiced bankruptcy law in Rhode Island for many years. In the early days, I got nervous when the phones stopped ringing in December. Then I noticed a pattern. Even though there are just as many people who need help in December, many choose to enjoy the holidays and deny reality for a few more weeks. Its just too depressing to file bankruptcy right before Christmas. Another reason why filings slow down in December is that families with children are trying to enjoy a little vacation. I'll be suprised if January 2010 does not make up for the temporary lull.