Recently released bankruptcy filing statistics for early 2006 have been widely reported as reflecting a huge drop in the number of bankruptcy filings—and that’s true when the filings for a month or quarter are simply compared to the same period during the previous year. However, a closer look at the numbers reveals that bankruptcy filings are increasing dramatically each month. While Chapter 7 bankruptcy filings are increasing most rapidly, there has been a steady month-to-month increase in the number of Chapter 13 bankruptcy cases filed as well. With so much confusing information in the media, the Total Bankruptcy website at
Consumers filed far fewer bankruptcy petitions during the first quarter of 2006 than they did during the first quarter of 2005: 116,771 in 2006 compared to 393,086 in 2005. That’s probably why local media across the country report that bankruptcy filings have "plummeted." A closer analysis of the numbers, though, paints a very different picture.
Consumer bankruptcy attorneys across the country have predicted from the beginning that bankruptcy filings would begin to climb again as soon as the initial impact of the law change and the pre-change rush to file had passed. Early this spring, Total Bankruptcy reported that local trends across the country indicated that bankruptcy filings were rising, slowly but steadily. The most recent national numbers indicate that the increase is accelerating.
Chapter 7 bankruptcy filings are climbing fastest, but Chapter 13 filings are steadily rising as well.
In November of 2005, the first full month after the law change, only 5,460 Chapter 7 consumer bankruptcy cases were filed. In January, that number climbed to 13,033. In March, the last month for which official statistics are available, 30,626 Chapter 7 consumer cases were commenced—that’s more than five times the number filed in November, and nearly three times the number filed in January.
In November, Chapter 13 filings outpaced Chapter 7, creating the initial impression that Congress’s goal of steering consumers away from Chapter 7 and toward Chapter 13 had been realized. The first month after the law change saw 8,298 Chapter 13 consumer bankruptcy cases nationwide. The balance has shifted, but the number of Chapter 13 filings has also steadily increased, to 19,351 new cases in March.
Official statistics for the second quarter are not yet available, but anecdotal information from various areas indicates that the upward trend continues, with a significantly higher number of personal bankruptcy filings during June than during March. Consumer bankruptcy attorneys and other experts are hesitant to guess at when filings might level off and whether or not they’ll reach pre-October, 2005 levels, but most agree that it’s too soon to make assessments about what, if any, long term impact the law change will have on filing rates.
