How Many People Have Filed Bankruptcy?

The past few days I had been wondering exactly how many persons in the U.S. have filed bankruptcy. By that, I don't mean how many filed last week, last month, or last year. Rather, how many persons walking around the U.S. have ever filed a bankruptcy case? My estimate is around 10% or 33 million persons. Here is the math.

To get a handle on this, I started with the Federal Judicial Center's Integrated Database for bankruptcy petitions. (For other purposes, I had previously done the massaging of the database needed to get it in a usable form.) Then, I asked for a count of the number of petitions each year from 2009-2018 where the debtor was an individual and had not filed bankruptcy previously. Also, I asked how many of those cases were joint cases--filed with a spouse--so we get a count of human beings and not cases.

During those ten years, there have been 9,076,016 bankruptcy petitions filed by someone who did not disclose a previous bankruptcy filing on the petition. Of those cases, 2,633,593 were joint cases, meaning there was a second individual. Putting those two numbers together, 11,709,609 individuals filed bankruptcy from 2009-2018. That number is a little under 3.6% of the U.S. population.

The database does not go back much further than 2009, and there are obviously people walking around who filed bankruptcy before then. Also, I do not know how many of the 11,709,609 individuals who filed from 2009-2018 are still alive. It is likely the former effect swamps the latter such that 3.6% is a floor. But, we can use some other data to get closer.

From the Consumer Bankruptcy Project, we know the average age of a bankruptcy filer is 49. That number has been getting higher over the decades, but to make our estimate of bankruptcy filers conservative, let's go with the (unrealistic) assumption that 49 was the average age of bankruptcy filers over the last 32 years. The Social Security Administration's most recent data have an average life expectancy of 34.1 more years for a 49-year old woman and 30.5 for a 49-year old man. Although women are overrepresented among bankruptcy filers and life expectancy is changing, let's take the midpoint of the most recent data and say the average bankruptcy filer lives for 32 years after filing for bankruptcy. That would suggest we need to go back to 32 years ago to get a good handle on how many people around who filed bankruptcy at some point in their life.

We already know that there were 11,709,609 individuals who filed bankruptcy from 2009 to 2018. In the 22 years before that, there were 22,898,122 consumer bankruptcy cases. These were all individuals. From 2009 to 2018, 29.0% of the cases involved joint filers, and 15.2% involved repeat filers. If we make the heroic assumption that those proportions were unchanged in the 22 years before, we can arrive at an estimate of how many persons filed bankruptcy during that time. That number is 25,048,714

If we put our two numbers together, we get 36,758,333 individuals who filed bankruptcy in the last 32 years. That is 11.1% of the current U.S. population. Yeah, some of these people will no longer be with us, but remember that some people who filed more than 32 years ago are still alive. On average, people live around 32 years after filing bankruptcy.

There are a lot of assumptions built into these calculations, and we should recognize the uncertainty. A good way to put it is that it is likely that around 10% of the U.S. population has filed bankruptcy at some point in their lives.

UPDATE (6/23/20): Ed Flynn of the American Bankruptcy Institute did a similar back-of-the-envelope calculation and came up with 12% of living adults have filed bankruptcy. It is always comforting to know that one gets to about the same number is Flynn, and this makes me even more comfortable that "around 10%" is a good estimate. The cite is Ed Flynn, "Bankruptcy by the Numbers," American Bankruptcy Institute Journal, Dec. 2015, at 48. The article is available online for members of the American Bankruptcy Institute.

Comments

[David Lynn]

Mr. Graeber:
This is very interesting.
However, are you taking into consideration that the official bankruptcy forms require the disclosure of prior bankruptcies ONLY IF filed within the past 8 years?
Many of my clients (I am a bankruptcy lawyer) have filed prior bankruptcies that don't get listed on the petition because they are more than 8 years old.

[Bob Lawless]

That is a good point. The FJC database captures the checkbox on the petition, which only asks about bankruptcies in the last eight years so using that datapoint does tend toward an overcount. In the Consumer Bankruptcy Project data, however, one-sixth of the filers who check the box are disclosing a bankruptcy that was more than eight years old and presumably are picked up as a repeat filer in the FJC data. (The FJC database does not have the date of the prior bankruptcy.)
More significantly, there are ways my estimate undercounts. Based on recent data, people live an average of 32 years after their bankruptcy, but that number was almost certainly several years higher in the 1990s and 2000s when bankruptcy filers were younger on average. That interacts with a slightly increasing life expectancy in difficult ways to compute. Also, there has been a slight downward trend in joint filings, meaning today's joint filing rate is probably lower than it was historically.
Putting all that together is why I took my 11.1% computation and said "about 10%" is a good estimate. We are not going to do better than a ballpark estimate using these figures. What surprised me is that estimate is magnitudes higher than I would expect many people would guess.