Welcome to NBKRC.com

National Bankruptcy Research Center September 2010 Bankruptcy Filings Report

Bankruptcy filings in September rose slightly from the previous month, to a total of about 130,000. Because filings in August and September are usually steady, this suggests, on a seasonally adjusted basis, a slight increase of about 4%. As compared to last year, filings for September were about 4% higher than for last September. Filings for 2010 to date are still about 11% higher than during the first three quarters of last year. To put that number in context: filings in the first three quarters of 2009 were 35% higher than at the same point in 2008.

Nationwide, filings this year to date amount to slightly more than 10000 filings per million households – about 1 in every 98 households. Through the course of 2010 the filing rates have become increasingly disparate throughout the country. 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 (23,000 filings per million households this year). Georgia, California, Utah, and Tennessee follow with about 50% more than the national average (16,000-17,000 filings per million households this year). The lowest filing rates, by contrast -- seven states had rates less than half the national average – are scattered throughout the country, generally in states remote from the aggressive lending activity that characterized the bubble of the last decade: Alaska, the District of Columbia, South Carolina, North Dakota, South Dakota, Texas, and Vermont.

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 the Southeast. Excluding small counties with less than ten filings, Gallatin County, Kentucky (near Lexington) has the highest rate in the country – more than four times the national average. Seven of the next nine counties with high filing rates are in suburban and rural Georgia near Atlanta. The most noteworthy urban county (fifth highest overall) is Shelby County, Tennessee (Memphis), which had more than three-and-a-half times the national average of filings in September. At the other end of the spectrum, the lowest filing rate in the country last month among urban counties (with a population more than 100,000) was in Brazos County, Texas (Bryan/College Station) – with a filing rate substantially less than one-tenth the national average.

Another accelerating 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, despite the nationally noteworthy high filings in Memphis, filings throughout Tennessee have fallen seven percent since last year; filings have fallen by lesser amounts in West Virginia, South Carolina, Mississippi, Alabama, North Carolina, and Iowa. By contrast, filings have risen sharply this year in the far Southwest: Hawaiian filings are up 33%, California’s by 30%, Arizona’s by 29% and Utah’s by 27%.

The data also reflect the continued prevalence of Chapter 7 (liquidation) filings; only 30% of the September 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 Gulf Coast. Thus, 61% of filings this year in Louisiana have been under Chapter 13, with similarly high shares in Alabama (56%) and Texas (49%). At the other end of the spectrum were States with relatively low Chapter 13 shares; Iowa, New Mexico, South Dakota, West Virginia, and Connecticut 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.