U.S. Bankruptcy filings surged last month, as the housing market turmoil that has recently spooked Wall Street also played out in federal bankruptcy court. July filings are up 38% over filings from the same month in 2006.Total bankruptcy cases for the first seven months of this year are already 50% higher than they were this time last year, according to data from Jupiter eSources LLC, which operates Automated Access to Court Electronic Records, a bankruptcy research firm.
Through the month of July, 460,828 bankruptcies have been filed in federal court, AACER revealed Friday, a significant jump from filings from the same period last year. Business bankruptcy filings make up just 5% of total filings, individual bankruptcy cases account for the rest.
Chapter 11 filings also did not see as dramatic an increase. Reorganizations are up 19% so far this year, when compared with the same seven month period in 2006.
According to Mike Bickford, chief manager of Jupiter eSources, total 2007 bankruptcy filings are on track to be significantly higher than last year, which ended up with just 590,000 filings, according to data compiled by AACER, down sharply from an all time high in 2005.
“My sense is that we're definitely headed to somewhere between 800,000 and 850,000 filings through the end of the year, depending on how much it picks up,” said Bickford.
That estimate is still far behind the number of bankruptcies filed in 2005, when the passage of a tough new federal law prompted many to rush into bankruptcy court before the stricter rules took effect.
In 2005, the total number of bankruptcies reached an all time high of over 2 million, the largest number of bankruptcy petitions ever filed in a single year, according to the Administrative Office of the U.S. Courts.
The 2005 reforms, which took effect in October of that year, were designed principally to cut back on individual bankruptcy filings and encourage Chapter 13 debt repayment over Chapter 7 liquidations.
According to the data compiled by AACER, Chapter 13 filings are already outpacing those from 2006, up 37% from filings over the same seven month period last year.
The 2005 law, the Bankruptcy Abuse Prevention and Consumer Protection Act, also increased the amount of paperwork required in bankruptcy cases, making filing more expensive for many. After the 2005 law took effect, bankruptcy filings dropped 70 %, according to the Administrative Office of the U.S. Courts. The number of business bankruptcy filings in fiscal year 2006 fell 50%, according to that office.
The American Bankruptcy Institute, which gets its numbers from the Administrative Office of the U.S. Courts, also released data on Friday showing that U.S. consumer bankruptcy filings increased 34.4% nationwide over the previous year.
The ABI blamed the rise in consumer filings on trouble in the subprime mortgage market, which has also increased recent turbulence on Wall Street. “The dramatic rise in bankruptcy filings so far this year reflects the reality of the stress that heavy debts put on American families,”said the Executive Director of ABI, Samuel Gerdano. “The trend line and concerns about housing markets, could presage even higher rates of filings later this year.”
AACER categorizes filings in a slightly different way from the Administrative Office of the U.S. Courts, resulting in some numerical variations.
Automated Access to Court Electronic Records or AACER is owned by Jupiter eSource LLC. It provides a portal into all federal bankruptcy courts, and compiles bankruptcy data from court dockets.
