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National Bankruptcy Research Center July 2010 Bankruptcy Filings Report

After falling for three consecutive months, bankruptcy filings in July 2010 rose for the first time since March, to 139,000 (from 127,000 in June). Because filings typically rise sharply in July, this does not suggest a reversal of the trend in filings. Indeed, on a seasonally adjusted basis (taking account of typical monthly variations), July filings were an insignificant 1% higher than filings in May and June. Still, the level of filings this year remains much higher than it was last year: filings for July were 9% higher than for last July, and filings for 2010 to date are still about 13% higher than during the first seven months of last year.

Nationwide, filings this year to date amount to about 8000 filings per million households – about 1 in every 125 households. The highest filing rates are concentrated in the Southwest and the Southeast. Thus, on a household-adjusted basis, Nevada has substantially more than twice the national filing rate (18,000 filings per million households this year). Georgia, California, and Utah follow with about 50% more than the national average (about 12,000 filings per million households this year). Six states had rates less than half the national average: Alaska, the District of Columbia, South Carolina, North Dakota, South Dakota, and Texas.

The variation at the county level is particularly provocative, because the counties with the highest filing rates (adjusting for households located in the county) are concentrated in a small portion of a single state: the suburbs of Atlanta, Georgia. Six of the ten counties with the highest filing rates were in Georgia. Four counties experienced more than 3500 filings per million households in July alone (three suburban Georgia counties and Shelby County in Tennessee).

Another noteworthy trend in the data is the sharp disparity in changes since last year. Where a few states (all in the South) already have begun to see rates fall after the recession, some states continue to experience sharp increases, even by comparison to the elevated filing rates of 2009. Thus, filings in southern states like Tennessee, South Carolina, West Virginia, Alabama, and Mississippi have fallen since last year. On the other hand filings in Hawaii, Arizona, California, and Utah have risen by 30% or more.

The data also reflect the continued prevalence of Chapter 7 (liquidation) filings; only 25% of the July filings sought relief under Chapter 13 (rehabilitation). The continuing decline in the share of Chapter 13 filings contrasts with the strong push by Congress in its 2005 bankruptcy legislation to encourage bankrupts to choose Chapter 13 rather than Chapter 7. As is typical, there was a substantial variation among the States in the prevalence of bankrupts seeking Chapter 13 relief. The States with the highest share of Chapter 13 filings remain concentrated in the South. Thus, 56% of July filings on Louisiana and Alabama were under Chapter 13. At the other end of the spectrum were States with relatively low Chapter 13 shares; New Mexico, West Virginia, South Dakota, and Iowa all had 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.