Bankruptcy

Bankruptcies Maintain Similar Month-to-Month Rate in January

By Bob Lawless

The January bankruptcy filing basically held steady to December, according to the new bankruptcy statistics now available from Automated Access to Court Electronic Records (AACER). There were just over 102,000 total bankruptcies spread over the nineteen business days in January. That is a daily filing rate of 5,386, a rise of only 1.3% from December's daily filing rate of 5,319. For monthly bankruptcy filing rates, a 1.3% increase probably does not rise above the threshold of statistical noise.

The January 2010 rate is a 20.6% year-over-year increase from January 2009. That may sound like a hugely impressive annual increase, but regular Credit Slips readers will know better. To keep the 20.6% year-over-year increase in perspective, consider that January 2009 had a 31.6% year-over-year increase compared to January 2008 which in turn was a 21.3% increase as compared to January 2007. It's not that double-digit increases in the bankruptcy filing rate are something to be sanguine about. Rather, the rate of increase in the rate of increase appears to be slowing. As the graph shows (click for a larger view), the year-over-year increase started slowing in August of last year. I attribute this slow down to the filing rate just catching up with its "natural" level after the trough following the 2005 changes to the bankruptcy law rather than any fundamental changes in the economic situation.

With one month of data, it is way too early to be making too many projections about annual U.S. filings. When I ran the numbers for January 2010, however, I noticed that the month of January constituted 6.4% of the bankruptcy filings in 2008 and 6.2% of the bankruptcy filings in 2009. Do two years of relatively consistent January numbers make for a trend? If so, then the January 2010 data suggest total annual bankruptcy filings will be 1.60 to 1.65 million. That would be just below my estimate of 1.70 million (or slightly more) filings for 2010.

Full post as published by Credit Slips on February 08, 2010 (boomark / email).