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National Bankruptcy Research Center May 2011 Bankruptcy Filings Report

Filings Sharply Down in May: Bankruptcy filings in May continued the downward trend that began in January: May’s filing total of 115,000 was markedly down from 135,000 in April. Even accounting for seasonal variations (filings normally are slightly lower in May than April), May filings are down more than 10% from April. More broadly, filings for the first five months of 2011 are down 8% from the same period last year. For May alone, filings were 16% down from last year, and even 8% down from the much more sanguine conditions in the spring of 2009. Looking over an even broader time period: for four years in a row (from 2007-2010), every month’s filings were higher than the filings for the same month in the previous year, but we have now had five consecutive months in which filings were down from the previous year. The worst is behind us.

Nevada and Georgia Still Have Highest Filings in the Country: Nationwide, 2011 filings amount to about 2562 filings per million adults, about one in every 390 adults. But that figure is quite misleading, because through the course of the last two years the filing rates have become increasingly disparate throughout the country. Generally, the highest filing rates are concentrated in the Southwest and a swathe cutting up from the Southeast. Thus, on a population-adjusted basis, Nevada has almost exactly twice the national filing rate (5176); Georgia, Utah, Tennessee, and California follow (in that order), all with more than 3700 filings per million adults already this year. At the other end of the spectrum, six jurisdictions this year have filings less than half the national average. In ascending order, they are Washington, D.C., Alaska, South Carolina, Vermont, North Dakota, and Texas. Texas is noteworthy in that group: although the other low-filing states are relatively small and commercially isolated, Texas’s filing rate is by far the lowest for any of the large-population commercially active states.

Trending Worse in Delaware and Utah, but Finally Better in Nevada: Perhaps the most interesting way to think about the data is to focus on the trends – changes in filings since 2010. As mentioned above, at the national level filings for 2011 have fallen steadily, about 8% below filings for 2010. But that conceals a bipolar pattern among the separate states. In a few states, filings are still rising rapidly: by 11% in Delaware and 8% in Utah. At the other end of the spectrum, scattered throughout the country are states experiencing a rapid decline in filings: a 29% drop in Vermont, 22% in West Virginia, 21% in Washington, D.C., and 18% in Iowa. The most interesting in that group probably is Nevada. Although it still has the highest filing rate for 2011 as a whole (and has had by far the highest rate for each month this year), its filings have fallen by 17% from 2010. The disparity underscores how far out of line Nevada’s filings were last year, when for much of the year they were more than 50% higher than those in any other state for much of the year. So, to pick the most obvious comparison, even though Nevada’s filings are down by 15% and California’s are still rising slightly, California’s filing rate is still less than 75% of Nevada’s. One interesting feature of Nevada’s pace-setting filings, notwithstanding the subprime mortgage crisis that presumably is at the heart of Nevada’s high filings, is that its share of Chapter 13 filings (23%) is far below the national average of 28%: whatever Nevada filers are doing they are not in bankruptcy to save their homes.

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.