Bankruptcy Filing Rate Remains Flat

Every month I see stories about the bankruptcy rate moving up and down. The truth is that the U.S. bankruptcy filing rate has remained flat over about the past four years.

The table to the right shows the total number of bankruptcy filings, consumer and business, using data from Epiq. For 2019, the figure is an estimate. For each of the past two years, 85.3% of the yearly bankruptcy filings had occurred by October 31. Extrapolating from the 648,000 bankruptcy filings through October 31 of this year, the total number of bankruptcy filings by year end will be about 760,000. That is not much different than the 767,000 in 2017 or the 755,000 in 2018.

Comparisons over time can be distorted because of population growth. U.S. Census estimates the resident population today is 7.2% greater than it was ten years ago. It makes more sense to think of bankruptcy filings on a population-adjusted rate, and that rate is currently 2.3 filings per 1,000 persons.

To get a sense of how bankruptcy filings are moving over time, there is one more wrinkle. It is also well established that bankruptcy filings are seasonal, with the highest filing rates occurring in the spring. Even the population-adjusted rate will move up and down over the course of the year. An easy adjustment is to take a 12-month moving average of the filing rate per 1,000 persons, and that is exactly what the graph does. That 12-month moving average has certainly come down since 2011, when it was 5.0 filings per 1,000 persons, but it has been basically flat since 2017 at 2.3 to 2.4 filings per 1,000 persons. Stories about the bankruptcy rate moving up or down have missed the bigger picture. Whether the flat trend line will continue, however, is a different matter.