Recently released numbers on personal bankruptcy filings show that April’s numbers were down from both March 2011 and April 2010, more or less following the trends that experts have predicted for the remainder of this year. Here’s a closer look at the specifics, and what this means for you.
Breakdown of April Bankruptcy Figures
The 21 business days in April saw 130,000 total bankruptcy filings, which comes to 6,177 filings per business day.
The number of filings shows a decline of 2.9 percent from March, and 7.1 percent from April 2010.
So far this year, filings have decreased each month at a rate somewhere between 5.6 percent and 8.2 percent compared to 2010 numbers.
In the past 12 months, 4.9 in 1,000 people have filed bankruptcy petitions. The number in 2004 (before the new bankruptcy law was passed) was 5.5 per thousand.
According to these statistics, April 2011 bankruptcy numbers suggest a decline in bankruptcy filings both compared to recent months and to last year. Bankruptcy filing rates, though not as popularly cited as unemployment numbers, can be used to offer at least a partial picture of economic recovery.
Projected Bankruptcy Filings for 2011
Based on the numbers for April and 2011 so far, predictions for total bankruptcy filings this year include the following:
1.475 million bankruptcy filings if Americans continue filing at the daily average rate (5,876) for the first four months of 2011 combined;
1.525 million bankruptcy filings if we continue at April’s daily average rate (6,177); or
1.499 million bankruptcy filings if the last eight months of the year make up the same proportion of filings as they did in the last two years.
How does that compare with the recent past? In 2010, the country had 1.56 million total filings; in 2009, the total was 1.474 million; and in 2008, 1.118 million. If filings stay on track, then, it looks like 2010 might have been the peak year for bankruptcy filings and 2011 will be the beginning of a decline.
There is no guarantee, however, that bankruptcies will steadily decrease. After all, the housing market is still glutted with foreclosure properties and home prices don’t seem to be rising. As a new wave of foreclosures begins to affect homeowners, combined with sluggish growth in the jobs sector, the need for bankruptcy protection could climb or remain constant for a few years to come.
Bankruptcy Filings and the “New” Law
If nothing else, these latest bankruptcy numbers suggest (once again) that the Bankruptcy Abuse Prevention and Consumer Protection Act passed in 2005 had little real effect on bankruptcy filing totals.
Those truly in need of the financial relief and protection bankruptcy offers are still largely able to get that help from the bankruptcy court, despite the tightened restrictions the law introduced.
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In a decade with two recessions, two wars and skyrocketing unemployment, bankruptcy became a financial safety net for a record 13 million Americans.
It's no wonder that Time called it the decade from hell.
Between January 2000 and December 2009, 13,363,085 personal bankruptcy petitions were filed as Americans attempted to defy debt, stop foreclosure and get a fresh financial start.
A large percentage of those came in 2005, when a new bankruptcy law threatened to make it more difficult to file Chapter 7 bankruptcy. More than 2 million bankruptcies were filed that year, as consumers rushed to beat the October deadline.
The decade total was an increase of nearly 29% over the bankruptcies filed in the 1990s.
Bankruptcy filings in 2009 reach 1.44 million as consumers and businesses dealt with unemployment, foreclosure and tight credit.
A total 1,435,425 bankruptcy petitions were filed in the 50 states and Washington D.C. That figure increases to 1,446,967 when Puerto Rico, Guam and the Virgin Islands are taken into count.
Nationwide, the bankruptcy rate was up 32% in 2009 compared to 2008 and reached the highest level since the 2005 bankruptcy law change.
Arizona saw the largest increase in bankruptcy filings in the U.S., with 77% more filings in 2009 than 2008. Nevada and Wyoming followed, each with a 59% increase year-over-year. Nevada had the most filings per capita.
Bankruptcies for the year peaked in October, when 133,365 petitions were filed—the highest amount since October, 2005, when consumers rushed to file before the BAPCPA law went into effect. Filings slowed in November and December, but remained above the 2008 monthly totals.
Business bankruptcy filings are increasing at an even faster pace than the record-setting personal bankruptcy numbers from 2009.
Last year, Chapter 11 business bankruptcy filings increased 50 percent from 2008, according to a Business Week report.
In all, more than 15,000 business decided to file Chapter 11 bankruptcy. Of these filings, some reorganized an remained in business, some were sold, and others sold their assets and closed shop completely.
But some businesses filed a Chapter 7 bankruptcy, which results in a liquidation of assets. Combined Chapter 7 and 11 filings resulted in a 38 percent increase in business filings for 2009.
The total comes to 89,402 businesses filing bankruptcy in 2009, reports the Wall Street Journal. That's almost 25,000 more business than needed help the previous year.
And, despite some signals that the economy is getting, business bankruptcy filings continued to pick up steam as the year went on. Business filings in December rose 3 percent compared with November, and were 13 percent higher than the same month for the previous year.
Among those business filing bankruptcy were 207 publicly traded companies. That's the third-highest total since 1980. And these companies also include some of the biggest and richest in the country, holding around $600 million in assets at the time of their bankruptcy filing.
That number is the second most of all time, just behind 2008's monstrous year which included the massive Lehman Brothers bankruptcy.
During the first decade of the 2000s, more than 400,000 businesses will have filed for bankruptcy protection, according to numbers from the American Bankruptcy Institute.
Consumer bankruptcy filings reached 113,274 in December, 2009, an increase of 33 percent over December, 2008, according to data released by the American Bankruptcy Institute, bringing an end to the highest year for bankruptcy since 2005.
The December total was also a slight increase over the 112,152 consumer bankruptcies filed in November, 2009, a sign that even the holiday season could have exacerbated consumers' financial stress.
Ten months in 2009 had total consumer filings top 100,000--only January and February were below that mark.
Bankruptcy Chapters
According to the ABI, 28 percent of consumer bankruptcies in December were Chapter 13 bankruptcy filings, with the majority of consumer filing Chapter 7.
Bankruptcy is often considered a lagging economic indicator, and typically remains high even with other signs of economic turnaround can be seen. The unemployment rate, for example, dropped slightly in November from its October high of 10.2 percent, and is expected to have dropped in December as well.
