Bankruptcy Filing Rate Drops Sharply in November

The bankruptcy filing rate fell sharply in November, declining 13.4% to a daily rate of slightly over 5,600 per day. On a year-over-year basis, November filings were down 2.7% from November 2009. The total number of filings in November -- 118,000 -- was spread over more business days making the daily filing rate decline greater than the decline in the total number of monthly filings reported elsewhere. Because the number of monthly bankruptcy filings is sensitive to the number of business days in a month, the daily filing rate is a more meaningful figure.

The drop in November is large and unexpected. For my next post, I have been working on a (simple) mathematical model to predict 2011 bankruptcy filings, and although this model works well for the rest of the year, it is unable to explain the big drop in November. That suggests something different happened with November bankruptcy filings than has happened with past experience. (One possibility was data error, but I think I have ruled out that possibility.) Unfortunately, I don't have any good explanation for the big drop in November.

Looking out toward the remainder of the year, we are looking at something right around 1,575,000 filings for the entirety of the 2010 calendar year. That is about 5.05 filings per 1,000 persons compared to the all-time high of 5.50 filings per 1,000 persons.

Finally, I often close these postings by thanking the ever-efficient people at Automated Access to Court Electronic Records (AACER) for providing the data used in my analyses. AACER's owner, Jupiter eSources LLC, was recently acquired by Epiq Systems, Inc., who have kindly continued to make the data available. So, thank you to the ever-efficient Epiq Systems for providing the same high-quality data that many of us have come to rely upon. And, a big congratulations to the people who grew AACER into a thriving, successful business and many thanks for all of your help throughout the years.

Comments

[Raymond Bell]

I believe part of the November drop was attributed to the delays or "freezes" on mortgage forclosures and especially the documentation issues from lenders such as BOA and Chase.

[Bob Lawless]

Very helpful comment. That explanation would be consistent with the data analysis -- that is, an orthogonal shock not accounted for in the past yearly cycles. (But, it is also not possible to show with just the data I used that the mortgage freeze necessarily led to the drop.)

[Kevin Radey]

Presuming they are related, would you expect a corresponding increase in filings after the foreclosures resume because of built up demand?

Lenders may be incapable of increasing the volume of their foreclosures with the political pressure on them to slow down. I think that could be a factor.

[Bob Lawless]

Yes, there would be a corresponding increase later as these would be presumably bankruptcies delayed.

But, I also am worried I'm getting too carried away with a one-month fluctuation in the data. Time-series fluctuate. Sometimes a fluctuation--as has been said about cigars--is just a fluctuation. The bankruptcy filing data could easily bounce back in December.

[Patches]

"freezes" Riiiiiggggght..wink wink. Their is no political pressure. The pressure is coming from industry. They know the power of "Citizen"....now!...(Alito mouthing the contrary as far as foreign contributions anyway)
It's to the Servicers advantage to delay or "freeze" foreclosures and not the debtors ultimately.

Nevertheless I've seen more small biz lately and even though consumer bks are down a "bit" the small biz has made up the difference....locally.

"Reform" is like an anchor on recovery. Corporations making huge profits and consumers wondering if their last paycheck is their last. I think you may also be seeing fluctuations in the political climate... Extension....No Extension..........extension. Extension? UE only gets you so far for so long and at the "end" it usually results in foreclosure. How many people are on unemployment and have mortgages? Are you going to pay your mortgage,food,utilities or Attorneys fees? 13s are a crap shoot because you know unemployment is uncertain right now. Hmmmmmmmm...I would definitely want to know if I'm going to get a job before my unemployment runs out. Many coming in at the very last moment for the chance ...or.... to give up and start over. Oh and of course spending the last year working on a mortgage mod which if actually accomplished is like winning the lotto. 13s are not miracles...with mortgages anyway and when you are year down and your income is uncertain your choices are kind of crappy in 13..