Bankruptcy Filings Drop 10% in 2015

According to the latest figures from Epiq Systems, total U.S. bankruptcy filings dropped 10% in 2015. The yearly total was 819,240 compared to 910,090 the previous year. As bankruptcy experts know, these figures are low. In 2015, there were 2.55 bankruptcy petitions per 1,000 persons, the lowest figure since 1989, ignoring the statistical gyrations around the 2005 bankruptcy law. If the decline keeps up, we won't even have to ignore the 2005-06 statistical gyrations for the statement to be true.

Last January, when forecasting the number of 2015 filings, I wrote, "a good estimate for 2015 bankruptcy filings is 800,000." That turned out to be not too bad of a forecast, off by only 2,5%. As the model I used seems to have been a good prediction, I will try it again and post the results here on Credit Slips.

Before I go off to crunch numbers, one other thing caught my eye in the latest numbers. The daily filing rate for December was only 2,446, which was a year-over-year decline of 14.8%. The decline in U.S. bankruptcy filings had been slowing, and I was expecting the decline to eventually flatten out. December is an unusually slow month for bankruptcy filings, but it is an unusually slow month every year. I am always cautious about extrapolating too much from one month of data, but the size of the decline in December took me by surprise. 

Comments

[Erich Fabricius]

The revised bankruptcy forms are likely the cause of the blip in December 2015. I know I tried to get cases filed on the old forms in November when possible, and wasn't enthusiastic to move quickly on unfamiliar forms and untested software when avoidable. I expect it to level out.

[Bob Lawless]

That is a great point, Erich. It is entirely possible December's statistical blip is from the new forms. As far as levelling out, I think December would still have been a decline but just not as big of a decline. If the form implementation is the reason, however, then some bankruptcies from December should be shifted into the new year.

[John]

For business filings, the trend is upwards. There were 5,125 Chapter 11 cases in 2015 versus 4,950 in 2014. (These are still much lower than 2009, but do show that 2014 was the bottom.) The trend also holds among large cases where there were 2,417 large filings versus 2,206 in 2014.

We expect this trend to continue for at least the first half of 2016. January has already been busy. Much of the turmoil can be found in low commodity prices.

An interesting index to consider is at distressindex.com.

[Knute Rife]

If we continue the rate hikes and deflationary policies, you'll see those figures start ticking back up.