Bankruptcy Filings Drop for 13th Consecutive Month

On a year-over-year basis, the U.S. bankruptcy filing rate dropped for the 13th consecutive month in November. According to statistics from Epiq Systems, Inc., the November daily bankruptcy filing rate was 4,923, a decline of 12.5% from one year ago. November marks the first time that the daily bankruptcy filing rate has dropped below 5,000 since January 2009.

Although the past seven months have seen double-digit year-over-year drops, these drops have consistently stayed between 10-17%. In other words, there is no increase in the rate of decrease. Extrapolating from this trend, we simply would expect to see about 10-17% fewer filings over the coming year than in the past year. Whether this trend continues, however, will depend principally on the ups and downs of the consumer credit market (not unemployment or foreclosure rates as conventional wisdom holds). In the next few weeks, I plan to be do my annual and slighlty more formal analysis of how these variables might interact and come up with a projection for 2012 U.S. bankruptcy filings.

The chart to the right shows the daily bankruptcy filing rate since 2004. (Clicking on the chart should open up a bigger version in a pop-up window.) The red line running across the middle of the chart is the daily filing rate in 2004, which allows for comparison between current filing rates and the filing rates prior to the 2005 changes in the bankruptcy law. The figures are population adjusted (using November 2011 as the base rate) such that the chart shows the daily bankruptcy filing rate after controlling for population growth. In 2004, the U.S. had 5.44 bankruptcy petitions per 1,000 persons. For the past twelve months, we have averaged 4.46 bankruptcy petitions per 1,000 persons. After accounting for the fact that the U.S. is almost 7% bigger now than it was in 2004, the per capita bankruptcy filing rate has dropped by 23%.