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National Bankruptcy Research Center June 2010 Bankruptcy Filings Report

Bankruptcy filings in June 2010 fell for the third straight month, to 127,000 (from 137,000 in May). Because filings typically decline through the second quarter of the year, this does not demonstrate that rates have begun to fall after the recession, but it does suggest that the rise in filings that dominated 2009 is coming to an end. For example, on a seasonally adjusted basis (taking account of typical monthly variations), filings for June were indistinguishable from filings for May. Still, filings for June were 8% higher than for last June, and filings for 2010 to date remain substantially higher than those for 2009, about 14% higher than during the first six months of last year.

Nationwide, filings to date amounted to about 6800 filings per million households – about 1 in every 150 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 (15,000 filings per household this year). States like Georgia, California, Utah, and Tennessee follow with about 50% more than the national average (about 10,000 filings per household this year). The lowest filing rates were in Alaska, followed by the District of Columbia, and South Carolina (all less than 40% of the national average).

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. Five of the ten counties with the highest filing rates were in Georgia. Four counties experienced more than 3000 filings per household in June alone (three suburban Georgia counties and Riverside County in California).

The data also reflect the continued prevalence of Chapter 7 (liquidation) filings; only 27% of the May 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, 61% of Louisiana filings and 54% of Alabama filings this year have been under Chapter 13. At the other end of the spectrum were States with relatively low Chapter 13 shares; Iowa, New Mexico, and South Dakota had less than 10% of their filings under Chapter 13.

The other 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, Alabama, and West Virginia have fallen since last year. On the other hand filings in Arizona and California, by contrast, have risen by 38% and 34% respectively.

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.