900,000 Bankruptcy Filings This Year, Maybe

Bankruptcy filings have continued to decline in the first part of 2014. This decline is part of a longer-term trend as the graph shows. (Clicking on the graph will bring up a larger version in a pop-up box.)  As always, thank you to Epiq Systems for providing the data.

The May 2014 daily bankruptcy filing rate was 4,079, which was a 7.0% decline on a year-over-year basis. There have been just over 405,500 in the first five months of 2014. For the past three years, filings for the first January - May have been approximately 44.5% of the yearly total. Extrapolating, we therefore can expect just over 900,000 bankruptcies for the entire calendar year.

The annual filing rate is now 3.08 bankruptcies per 1,000 persons. The last time bankruptcy filings were this low was 1990. (if we ignore the anomalous statistical gyrations around the 2005 bankruptcy law).

With these latest numbers, the year-over-year bankruptcy filing rate has declined for forty-three straight months. The only indication this decline might stop is that the May 2014 year-over-year decline of 7.0% was the smallest decline since April 2011 when the decline was also 7.0%.

Comments

[Ross & Ross]

Great post. This trend is admittedly surprising as one has grown accustomed to seeing the worsening economic conditions of many Americans. What is the proposed cause of this continued decline?

[Bob Lawless]

I have explored the reasons for the trend in other posts. The short version is that it has a lot to do with the availability of bankruptcy alternatives and very little to do with overall economic conditions. Bankruptcy is a legal act with legal consequences and is not necessarily an indicator of prevailing economic conditions. Some of the highest bankruptcy filing rates occurred in boom economic times.

[NC Law]

Is it possible to divine whether or not the 2005 bankruptcy law had the intended results?

[Bonnie Clair]

It is too soon to tell whether BAPCPA had its "intended results".

BAPCPA put an eight year bar to refiling in place. BAPCPA went into effect mid-October 2013, which means that many individuals who filed in the big 2005 rush were barred from refiling until some time in the second half of last year.

It will take time refilers to realize that they can, in fact, refile and then to consider whether to do so. An improving economy will shift the time for that to occur, requiring a further lag in time for BAPCPA's long-term effects to be known.

That said, the filing cycle always has highs and lows. Legislation may lengthen the cycle, but it will not eliminate the cycling itself.