It's monthly bankruptcy filing data time. Long-time readers will suspect I am about to hit my usual theme: the raw numbers are usually deceiving. Although March saw a lot of bankruptcy filings, both the number of extra days in March and seasonality in the data make the March figures almost good news. In fact, on a year-over-year basis, the filing rate continues to decline. As always, thank you to the folks at Epiq Systems for providing the data reported and analyzed here.

There were just over 146,000 total bankruptcy filings in March 2011. That is a big number, especially as compared to the 110,000 bankruptcy filings in February. But, after one adjusts for the fact that there were four more business days in March than February, the daily bankruptcy filing rate rose only 10.4% in March. Moreover, bankruptcy filing rates display high levels of seasonality, with February, March, and April always seeing the highest filing rates as debtors use tax refunds to pay attorneys and court fees. The increase in March 2011 bankruptcy filing rates is very consistent with historical trends.

On a year-over-year basis, daily bankruptcy filings actually decreased by 8.2% in March 2011. Since last November, the year-over-year daily filing rate has shown a decrease each month of  between 5% and 8%. Also, extrapolating from the proportion of bankruptcy cases that were filed in the first three months of 2010, the first three months of 2011 suggest filings will be down about 5% for the entire year. All of these data points are consistent with the predictions of my (not-so) fancy mathematical model suggesting a decline of 5-10% in the annual filing rate for 2011. It probably would be unseemly for me to brag about how my mathematical model has so closely predicted the real world, at least so far, so I won't do it.

What do those data points mean? Somewhere around 1.45 million bankruptcy cases will be filed in the U.S. during 2011, representing about 1.8 million individuals (because about 30% of the cases are filed jointly by a husband and wife). The data may predict a decline, but they hardly indicate that the American middle class is in good shape.