Home -> Law Blog Directory -> Bankruptcy Blogs -> Credit Slips

Bankruptcy

: Credit Slips

July Bankruptcy Filings Rise, But Look at the Big Picture

By Bob Lawless

The folks at Automated Access to Court Electronic Records (AACER) sent over the July bankruptcy figures. Total U.S. bankruptcy filings in July (134,600) were about the same as they were in June (133,900). There was extra business day in July, however, meaning that the daily filing rate, rose 5.3% to 6,408. The year-over-year increase in the daily filing rate was 7.7%.

Regular readers know that I am skeptical of reading very much into the ups and downs of the monthly filing rate. If you had looked at the June fiing rate, you would have seen an 8.9% drop in daily bankruptcy filings and perhaps concluded the economy was beginning to turn around. The July increase might lead you to the opposite conclusion. The most informative analysis comes from taking a longer term look at the data. And, there is my usual caveat that bankruptcy filings are, at best, a weak and trailing indicator of overall economic strength.

The table shows the daily filing rate for the past twelve months. The annual pattern has pretty much stayed the same since the 2005 bankruptcy law took effect. For example, the July 2010 filing rate is below what it was in March 2010--this also was true in 2009 and 2008. Also, June is typically a month of lower bankruptcy filing rates (although I have no idea why). The basic annual pattern has been a large surge in filings in the early part of the year followed by steady or slightly declining rates for the remainder of the year. My conclusion from the data is that the bankruptcy filing rate in 2010 is going about the same as it did in 2009, 2008, 2007, and 2006. The ups and downs in June and July are just noise.

Turning to projected bankruptcy filings for all of 2010, my initial estimates were around 1.65 million. I am starting to think that figure is a little bit too high. My estimate for total calendar year filings is between 1.60 and 1.62 million filings. Specifically, total U.S. bankruptcy filings for 2010 will be:

• 1,602,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (6,357 per day) as they have averaged for the first seven months of 2010
  
• 1,607,000 filings if bankruptcy filings continue for the same daily rate (6,408 per day) as they have averaged for July 2010
• 1,617,000 filings if bankruptcy filings for the remaining six months of 2010 constitute the same proportion of total filings as the last six months of 2009 constituted for total filings that year (about 57.4%)

To get to 1.65 million filings for 2010, they would have to average 6,810 per day for the rest of the year. That is below the March 2010 rate, but we would have to have a large increase from the current filing rate to reach that number of filings. Given the pattern we have seen in past years, it seems unlikely that we would see such a huge increase for the rest of 2010.

Full post as published by Credit Slips on August 03, 2010 (boomark / email).