Category: Bankruptcy Data

  • Bankruptcy Filings Will Be the Lowest Since 1995 — Here Is a Reason Why

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    2014 Projected Filings from AugustIn June, I said we are on track for just over 900,000 bankruptcy filings for 2014. The latest data are in from Epiq Systems, and that 900,000 figure remains the best estimate for the calendar year. We have had 556,875 total bankruptcy filings this year, and in 2012 and 2013, the last five months added 39.5% more filings. That gives an estimate of abut 907,000 filings for 2014.

    Year-over-year declines remain large. There were 77,489 total bankruptcy filings in July or 3,521 filings per business day, a 11.7% decline from the previous year.

    As the chart shows, the number of bankruptcy filings will be the lowest in the last seventeen years — indeed the lowest since 1995. Those of you paying attention at home might point out that 2006 and 2007 appear to be lower, but these were the years around the passage of the 2005 bankruptcy amendments. If we average 2005 – 2007 for a more accurate picture, there were 1.1 million filings per year.

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  • “Don’t give me so much that you’ve given me nothing” – Remembering M. Caldwell Butler’s Contribution to Bankruptcy Law

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    Former Virginia Congressman M. Caldwell Butler died last week. He is widely known for his role in the Nixon impeachment proceedings, his efforts to limit extensions of the Voting Rights Act, and his support for ensuring legal representation for low-income individuals. But Congressman Butler is also a major figure in the history of bankruptcy law. He was a principal co-sponsor of the Bankruptcy Reform Act of 1978 that serves as the foundation of the modern bankruptcy system. Professor and lawyer Kenneth N. Klee worked closely with Congressman Butler on the House Judiciary Committee in the 1970s. I asked Professor Klee to share a few words of remembrance with us, which I repeat in their entirety here:

    I first met M. Caldwell Butler in 1975 when he became the Ranking Minority Member of the Subcommittee on Civil and Constitutional Rights of the House Judiciary Committee. Caldwell was most interested in the Voting Rights Act legislation and finding a way for the South to get out from under the Act. In his view, Washington was improperly interfering with the sovereignty of the southern states based on predicate acts that had long since ceased to serve as a basis for federal control. He asked me to draft a series of amendments that would permit the South to extricate itself from the Voting Rights Act. The requirements to regain sovereignty were quite demanding, to the point that the amendments became known as the "impossible bailout."  Nevertheless, the amendments did not come close to passing. It was evident that there were no circumstances under which the majority in Congress wanted to let the southern states out from the Voting Rights Act.

    Caldwell assumed his responsibilities over bankruptcy legislation with diligence and good cheer. His fabulous sense of humor carried us through many long markup sessions during which the members of the Subcommittee read the bankruptcy legislation line by line. He had a sharp legal mind and deep curiosity. He also was very practical and to the point. He was fond of telling me "don't give me so much that you've given me nothing."

    It was a privilege and honor to work with him. The bankruptcy community should join in paying him tribute.

                            — Ken Klee

    Congressman Butler made another round of contributions to bankruptcy reform in the 1990s. The fact that they are not all reflected in today's Bankruptcy Code makes this story more pressing, not less. Well over a decade after he had returned to the practice of law in Virginia, Congressman Butler was appointed to the National Bankruptcy Review Commission, for which I was a staff attorney. Expressing satisfaction with the 1978 Code, the House Judiciary Committee directed this Bankruptcy Commission to focus, for two years, on "reviewing, improving, and updating the Code in ways which do not disturb the fundamental tenets of current law."  Not one to leave the heavy lifting to others, even in a pro bono post, Congressman Butler stepped up to the challenge of forging a compromise, among those with diverging politics and views, to improve the consumer bankruptcy system.

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  • 900,000 Bankruptcy Filings This Year, Maybe

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    Monthly Filing Trends 2004 to 2014Bankruptcy 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%.

  • Working and Living in the Shadow of Economic Fragility

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    OupbookCredit Slips readers, please note the publication of a new book edited by Marion Crain and Michael Sherraden. The New America Foundation is hosting an event on the book tomorrow, Wednesday, May 28, 2014 at 12:15 EST. Not in Washington, D.C.? The event will be webcast live

    The book project developed out of a stimulating multi-disciplinary conference at Washington University in St. Louis. Participants had great interest in considering how bankruptcy scholarship fits within the larger universe of research on financial insecurity and inequality. My chapter with Mirya Holman synthesizes the literature on medical problems among bankruptcy filers and presents new results from the 2007 Consumer Bankruptcy Project on coping mechanisms for medical bills, looking more closely at the one in four respondents who reported accepting a payment plan from a medical provider. Not surprisingly, these filers are far more likely than most others to bring identifiable medical debt, and therefore their medical providers, into their bankruptcy cases. We examine how payment plan users employ strategies – including but not limited to fringe and informal borrowing – to manage financial distress before resorting to bankruptcy, and (quite briefly) speculate on the future of medical-related financial distress in an Affordable Care Act world.

  • Cui bono?

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    At a conference on consumer bankruptcy policy over the weekend in Athens, Greece (a place that knows all too well about consumer financial distress) and again today in class, I confronted a really nagging, fundamental problem of bankruptcy policy: For whose benefit do modern societies develop consumer bankruptcy laws, and do these systems actually deliver such benefits? In my view, the most convincing and common explanation for why existing systems offer debt relief to consumers is that relieving their suffering redounds to the greater benefit of society at large (see, e.g., section I.9, pp. 26-40, in the World Bank's Report). The problem is that I know of no empirical proof of this essential assertion. Indeed, to the contrary, I have seen well done empirical evaluations of the fresh start that suggest that, at least in the US bankruptcy system, many consumer debtors are not being reinvigorated and reintroduced into the productive, open-credit society.

    I'm no empiricist, but it strikes me as potentially impossible to substantiate the premise of consumer bankruptcy policy empirically. It would be a monumental task to even formulate a research agenda for such a question. How would/could anyone ever prove that society benefits from relieving consumers of overburdening debts? Has anyone tried? Am I missing something I should be citing? Is anyone attempting to answer the question today? Any leads welcome.

  • Are Churches Slowly Recovering?

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    I'm thrilled to join Credit Slips as an occasional contributor. As Bob mentioned, my research focuses on religious organizations that file under chapter 11. Based on the approximately 500 religious institutions that filed between 2006 and 2011 (about 90 cases per year), I previously concluded that primarily small nondenominational and congregationalist Christian churches seek to reorganize in hopes of retaining their buildings after they have fallen behind on mortgage payments. I recently updated my database of religious organization chapter 11 cases through the end of 2013 to see if faith-based institutions filed in similar numbers over the past couple years. (My previous paper details how I identify these filings.)

    2006-2013 Filings - 2This graph shows the number of religious organization chapter 11 cases filed per year (values on left axis) versus the total business chapter 11 filings per year (values on right axis) based on data from Epiq Systems. Religious organizations are still filing in what some might view as substantial numbers: 107 cases were filed in 2012 and 89 cases were filed in 2013. Similar to total chapter 11 filings, their filing numbers are declining. On average, religious organization cases still account for about 1% of chapter 11 filings every year. 

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  • Bankruptcy Filings Fall 13% in 2013

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    2013 Projected Filings from DecemberThe year-end bankruptcy data from Epiq Systems just became available. Total bankruptcy filings in 2013 were 1,032,326, a 13% decline from the previous year. (Note the precise total will be subject to minor final adjustments.)

    On a monthly basis, the daily filing rate in December was down 16.3% on a year-over-year basis. The monthly decline continues a long-term trend of falling bankruptcy filing rates. Filings are currently running around 3.3 per 1,000 persons. Last year at this time, it was 3.8 per 1,000 persons as compared to a post-2005 high of 5.0 bankruptcy filings per 1,000 persons, which occurred in September 2010.

    Once December consumer credit statistics and recent economic indicators become available, I will try to make a forecast of where bankruptcy filings might be heading. This year, I predicted between 1,019,000 and 1,100,000, although that was in a May posting with four months of data available so I was cheating a little. Still, I take it as a predication.

  • (Yet Another) Chapter 13 Map

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    Chapter 13 Percentages by DistrictThis post will have to be short on commentary — "yay!," goes the reader — as I am in the middle of getting ready for a conference. One of the things that preparation entailed is putting together the map to the right. To see the map well, you will need to click on it and a bring up a full-size image in a pop-up box.

    The map shows the percentage of all 2013 bankruptcy cases that were chapter 13s in the 90 federal judicial districts in the fifty states and the District of Columbia. Over the years, I have put up numerous maps and tables about chapter 13 rates. This map shows the same patterns we have seen in the past in terms of both the range of variation and geographic concentrations of high chapter 13 districts. This version is different because it (a) uses 2013 data (through November) and (b) has groupings based on a cluster analysis. (A cluster analysis finds "natural" groupings of data based on the data's statistical properties.)

    If anyone else has a use for the map, feel welcome. All I ask is attribution back to this post.

  • As Bankruptcy Filings Fall, the Percentage of Chapter 13s Rises

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    Percentage 13sThe latest bankruptcy filing statistics from Epiq Systems have just been released. They show that U.S. bankruptcy filings in November were just over 3,700 per business day. That is a 15.0% decrease on a year-over-year basis from last November. With just one month left in the calendar year, it looks like 2013 will see a total of around 1,030,000 total bankruptcy filings, representing a 13.1% decline in bankruptcy filings as compared to 2012.

    My posts on the bankruptcy filing rate inevitably lead to questions about the reasons for the decline. If you are new to the blog, you can find many old posts discussing the reasons for the decline on our bankruptcy data page. I will try to write more about the patterns and trends I see in the bankruptcy filing rate decline after the first of the year when the full year's worth of data is in. 

    Until then, it seemed useful to note that the percentage of bankruptcy cases that are chapter 13s has been increasing ever since the bankruptcy filing rate started declining in 2011. In an earlier post, I noted that the decline in the filing rate seems to be less in judicial districts where chapter 13 rates are high. A similar dynamic appears to be present in the annual data. Chapter 7 filings seem to have greater variation than chapter 13 filings, although it is fair to say the effect is not of a huge magnitude. 

  • The Second Derivative on the Bankruptcy Filings Rate

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    Moving Average Bankruptcy Filings 2008 - 2013It's been a while since my last blog on bankruptcy filing rates. Indeed, the blogging has been slow for me since I got some new responsibilities in the day job. It's time that changes.

    The bankruptcy filing rate continues to decline. That is bad news for bankruptcy lawyers but good news for, well, people. The second derivative, however, seems to be declining — that is the rate of change in the rate of change is slowing, albeit barely. Instead of year-over-year declines each month of 14-15% as was happening last year, declines are now around 11-12%. Year-over-year declines the past three months have been -11.0%, -12.5%, and 11.4%.

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