Bankruptcy filings in December 2009 topped 110,000 for the tenth straight month, for a 32% increase over last December’s total. The high number of December filings suggests an unusual seasonal pattern. December filings typically are much lower than November filings, but this year they were almost identical (even considering the relative number of days). Still, the trend in bankruptcy filings in recent months suggests that we have passed the peak of filings related to the economic crisis, and thus that 2010 filings will be lower than 2009 filings. Rolling three-month data (Figure 1) account for the seasonality in filing trends, but illustrate the comparatively higher filing patterns for 2009. For comparison, foreclosure data over the last three years reveal no comparable peak (Figure 2, based on data from the Mortgage Bankers Association).
With the December filings, the total for 2009 is above 1.4 million, a 32% increase over filings for 2008. Indeed, 2009 filings were the highest in any year since the 2005 bankruptcy reform bill.
The increase includes a marked upturn in the last year in Chapter 7 (liquidation) filings, which have increased by more than 42% as compared to this time last year, where Chapter 13 (rehabilitation) filings have increased by only 12%. The steadily declining share of Chapter 13 filings (less than 30% of 2009 filings to date) contrasts with the strong push by Congress in its 2005 bankruptcy legislation to encourage bankrupts to choose Chapter 13 rather than Chapter 7.
Nationwide, 2009 filings amounted to more than 12,000 filings per million households – about 1 in every 80 households. As Map 1 shows, the high filing rates are concentrated in two clusters: the Southwest and the Southeast. Interestingly, as Map 2 shows, the concentration of foreclosure proceedings is much different, with the highest concentrations clustered in the northern Midwest.
The states with the highest household-adjusted bankruptcy filing rates are Nevada (two-and-half times the national average), followed by Tennessee, Georgia, Alabama, and Indiana (with household-adjusted filing rates more than one and a half times the national average). More than one out of every six bankruptcy filings this year has occurred in one of those States, even though those States include only one in twelve American households. The lowest filing rates were in Alaska (less than a third of the national average), followed by the District of Columbia, North Dakota, South Carolina, and South Dakota (all far less than half the national average).
The States with the biggest increase in filings over the previous year were Arizona (an 80% jump) followed by Nevada, California, Wyoming, and Utah (all with increases of 55-60%). Although 2009 filings were higher than 2008 filings in all States, several States have experienced comparatively modest increases. The lowest increases (all about 12-14%) are in Nebraska, Pennsylvania, Alaska, and Tennessee.
At the county level, the counties with the highest filing rates (adjusting for households located in the county) were concentrated in Georgia. Seven of the ten counties with the highest filing rates were in Georgia, with the highest rate in the county occurring in Shelby County, Tennessee (Memphis), with a filing rate almost three times the national average. The second and third highest filing rates were in two counties east of Atlanta (Newton and Barrow), both with filing rates more than two and a half-times the national average.
On a national basis, 28% of all filings to date were under Chapter 13, the procedure most directly related to home-mortgage distress. Again, there was a substantial variation among the States on the prevalence of bankrupts seeking Chapter 13 relief. The States with the highest share of Chapter 13 filings (50% or more in each case) were concentrated in the South: Louisiana, Alabama, South Carolina, Tennessee, and Texas. At the other end of the spectrum were States with relatively low Chapter 13 shares. (The three lowest were New Mexico, Iowa, and West Virginia, all with less than 10% of their filings under Chapter 13.
This analysis was performed on data collected by the National Bankruptcy Research Center (NBKRC) by NBKRC contributor Professor Ronald Mann of the Columbia Law School.