You might reasonably ask why we are discussing first quarter bankruptcy filings now that the second quarter has just started. It’s because the Administrative Office of the US Courts takes its sweet, and increasingly long, time in publishing the data.
And it’s a doozy. The story didn’t get much play because the AO’s quarterly report highlights 12 month comparisons, and the 12 months ended March 31, 2006 included the run up to the effective date of the new bankruptcy law, October 24, 2005 (remember that there were lines at courthouses right before the changeover).
Bankruptcy filings in the first quarter of 2007 increased 65.8% over the same period in 2006 (193,641 versus 116,771). And Bob Lawless at Credit Slips who pointed us to this data indicated, in an earlier post of his, that bankruptcies for 2007 would continue at a high level:
Based on new data about filing trends in the first part of 2007, I have a prediction–there will be close to or even more than 1,000,000 U.S. bankruptcy filings in the 2007 calendar year. The folks at AACER have provided data showing that there were 72,945 bankruptcy filings during the month of March. That was 3,316 filings per day (measured by business days), a 7.3% increase from the previous month. That comes on the heels of a 17.6% increase in filings per day in February as discussed in a previous blog post. The per day filing figures for February and March 2007 are respectively 69.6% and 56.6% higher than one year previously. Bankruptcy filings are on the rise and dramatically so.
Extrapolating from these figures, we can make some guesses at where bankruptcy filings might end up for the 2007 calendar year. The AACER data show that there were 186,788 total bankruptcy filings from January – March 2007. If bankruptcy filings per day remain constant through the rest of the year, we will have 821,044 total filings. Of course, it is unlikely that filings per day will remain constant, especially when one considers the growth at the beginning of the year. If we assume that March’s 7.3% growth rate will continue throughout the year, we will have 1,088,297 total bankruptcy filings in 2007. Neither assumption–no growth or a steady 7.3% growth–is likely to occur. For example, we know from a Credit Slips post by guest blogger Ronald Mann that bankruptcy filings historically hold steady or even slightly decline in the summer months. Perhaps the estimates are best viewed as outer boundaries with the expected outcome being just shy of 1,000,000 total filings..